International Gemological Institute Limited Q1 FY2026 Concall Summary

Key Takeaways

• Volume-led beat, margin in line: Certification volume grew 21% YoY on broad strength across natural and lab-grown diamonds, while EBITDA margin landed at 58%, within the guided 57–64% band.
• LGD pricing has found a floor: After years of deflation, management called the bottom on lab-grown diamond pricing, citing producer ROI compressed to 8–10% with no room left to fall.
• GIA’s retreat opens a door: GIA’s decision to stop 4C grading for LGD validates IGI’s full-certification stance and is already drawing client inquiries, though the switching pool is small because IGI already dominates the category.
• US and Belgium still soft, tariff overhang persists: International performance is split: Netherlands, Dubai and China are strong, but US and Belgium remain weak on tariff uncertainty, with a turnaround hoped for in Q3 or Q4.
• What to watch next quarter: Whether the US business actually turns, whether the GIA-driven client switching materializes into revenue, and whether the LGD pricing floor holds through the seasonally strong Q3.

Volume & Revenue Drivers

• Broad-based volume growth: Total certification volume rose 21% YoY to 0.3 crore reports, with natural diamonds up 14% and lab-grown diamonds up 24%. The natural diamond mix skewed toward smaller stones (dossier reports), which pulled blended ASP down 3% YoY to ₹963.
• Certification income the engine: Certification income grew 18% YoY to ₹292 crores, driving total revenue growth of 20% to ₹314 crores. H1 certification income reached ₹588.8 crores, up 14%.
• ASP stabilizing sequentially: ASP improved 3–4% QoQ at the India level as the price effect from LGD deflation in April–May cycled through. Management sees stability over the last 3–4 quarters and expects no further dilution.
• Jewelry segment emerging: Lab-grown diamond jewelry acceptance is gaining momentum in India, where it has been slow relative to the US (where over 50% of bridal now uses LGD stones). IGI is investing in awareness and expects jewelry to drive a significant proportion of growth in coming quarters.
• Other income hit by Europe slowdown: Other operating income fell sharply to ₹8.8 crores from ₹117 crores a year ago, driven by a slowdown in the sorting and screening business in Antwerp as large super-luxury brands pulled back.

Tehmasp Printer: "We grade diamonds and we give you the origin, whether it is lab grown or it is natural. Certification becomes a very important factor that, if you are buying natural, you need a certification to know for sure that it is not a lab grown. And if you are buying lab grown, you need to be sure that it is not a piece of glass. So here IGI is policing the entire market and giving the consumer the value for the money that he or she is putting in."

Lab-Grown Diamonds: Pricing Floor & Competitive Shift

• Pricing correction called at the bottom: Management stated that at current wholesale prices, LGD producers earn an ROI of only 8–10%, leaving very little room for further price declines. No further pricing correction is expected.
• GIA retreats from 4C grading for LGD: GIA announced it will stop 4C grading for lab-grown diamonds, moving to a minimalistic brochure certification. IGI will continue to provide full 4Cs and origin certification for both natural and lab-grown stones.
• Client switching inquiries have begun: Some clients are looking to switch from GIA to IGI following the announcement, though the number is small because IGI already holds the bulk of LGD certification.
• Origin now as important as 4Cs: Management argued that origin certification has become even more critical than the 4Cs, since the 4Cs are identical across natural and lab-grown diamonds and consumers need to know what they are buying.

Tehmasp Printer: "Today, we not only give the 4Cs on both natural as well as on lab-grown, because that is what the diamond is. And that is what the consumer understands."

Tehmasp Printer: "See, this is essentially minimizing a category and we don't believe in that."

Geographic & Segment Performance

• Tariff impact indirect but real: Management clarified there is no direct implication for IGI from tariffs since invoicing is done in India and IGI certifies goods being exported. However, the US and Belgium softness is attributed to tariff-related uncertainty affecting the manufacturer-retailer dynamic.

Eashwar Iyer: "There is no implication for IGI from a tariff standpoint. So that I think we have to just clarify to you. I think it's a play between the manufacturers and the retailers. So IGI per se is not affected by tariff."

Margins & Costs

• Q2 margin within guided range: EBITDA margin came in at 58%, down from 64% sequentially but within the 57–64% guided band. The sequential dip reflects a normal seasonal slowdown in ND Jewelry (which ramps up in Q4 and Q1) plus one-off investments in AI architecture.
• H1 margin healthy: H1 EBITDA margin stood at 61%, with EBITDA growing 23% to ₹369.2 crores and PAT up 31% to ₹267 crores (margin 44%).
• Cost base resetting: Employee benefits expense declined YoY because a one-time severance charge was taken in the US business in Q2 2024. Sequentially, employee costs rose to ~₹71 crores from ~₹65 crores on annual increments and ~250–300 new hires; this level is expected to hold for the next two quarters.
• Other expenses elevated on one-off: Other expenses rose sequentially to ~₹56 crores from ~₹50 crores due to one-time investments in a project; expected to stabilize back to ~₹50 crores.
• Subsidiary margin pressure: Consolidated-minus-standalone margin came in at ~4%, similar to the 3% seen in the same quarter last year. Management attributed it to a one-off and expects improvement as the US business picks up.

Strategic Investments

• Digital transformation underway: The company is embarking on a digital transformation initiative to enhance service delivery quality and reduce turnaround time.
• AI architecture build-out: Significant strategic investments are being made to build AI capability within the organization, with one-off expenses booked in Q2. The stated aim is to shorten service delivery and stay aware of global developments.
• Infrastructure and talent ramp-up: The company is actively ramping up infrastructure to support volume growth, opened a couple of new labs in recent months, and recruited gemologists, graders and back-office staff in the first 4–5 months of the year.
• Inorganic growth on the radar: Management continues to evaluate opportunities for acquisitions and inorganic growth. A dividend is also under active consideration and will be put to the Board.

Guidance & Commitments

Key Metrics