International Gemological Institute IPO Review: Should You Subscribe?

The International Gemological Institute IPO is set to open from 13th December 2024 to 17th December 2024, and the company is offering its shares in a price range of ₹397 to ₹417. With an issue size of ₹4225 crore, this IPO has caught the attention of investors interested in the booming diamond, jewellery, and certification industry. In this detailed review, we will take an in-depth look at IGI’s strengths, risks, financial performance, and the IPO’s potential.

International Gemological Institute IPO Overview

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About IGI (International Gemological Institute)

Founded in 1999, IGI is a leading provider of certification and accreditation services for diamonds, studded jewellery, and coloured stones globally. It has gained significant recognition, with a 33% global market share in the diamond and jewellery certification industry. IGI also leads the certification of laboratory-grown diamonds, holding a 67% market share in this rapidly growing segment.

IGI’s parent company is Blackstone Group, the world’s largest alternative investment firm, giving IGI access to substantial resources and expertise. IGI operates through a network of 31 branches in 10 countries, including key markets such as Surat, Mumbai, Antwerp, New York, Dubai, and Hong Kong.

Key Highlights of IGI’s Business Model:

1. Global Leader in Certification: IGI certifies diamonds and jewellery in various forms—natural diamonds, lab-grown diamonds, and coloured stones.
2. Growing Market for Laboratory-Grown Diamonds: IGI has been the leader in certifying lab-grown diamonds since 2005.
3. Wide Geographical Reach: With a presence in 10 countries and over 7,500 customers, IGI has built a robust international network.
4. Education and Training: IGI also offers educational programs and courses in gemology, diamond grading, and jewellery design.

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Financial Performance:

IGI has displayed steady growth in revenue and profit over the past few years:

• Revenue:
  • FY21: ₹364.69 crore
  • FY22: ₹490.99 crore
  • FY23: ₹638.53 crore
• Profit After Tax (PAT):
  • FY21: ₹171.53 crore
  • FY22: ₹241.76 crore
  • FY23: ₹324.74 crore

This consistent growth demonstrates IGI’s strong position in the global certification market and its ability to generate stable revenue streams.

Strengths of IGI IPO

1. Market Leadership: IGI holds a 33% share of the global certification market for diamonds and jewellery, making it the second-largest player worldwide. Additionally, IGI leads the laboratory-grown diamond certification market with a 67% share, making it well-positioned in a rapidly growing segment.
2. Diversified Service Offering: IGI’s services cover a wide range of gem and jewellery products, including grading, certification, co-branded reports, sorting, and detection services for diamonds and coloured stones. The company’s expertise and range of offerings set it apart from its competitors.
3. Blackstone Backing: As a portfolio company of Blackstone Group, IGI benefits from the resources, relationships, and expertise of one of the world’s largest asset managers.
4. Steady Growth in Revenue and Profit: IGI has demonstrated consistent growth in both revenue and profit, with a solid track record over the last few years. This positions IGI as a stable company in a niche market.
5. Expanding Global Presence: IGI operates 31 branches in 10 countries and has a strong customer base across the globe. It has also expanded its footprint in India, which is the world’s largest centre for cutting and polishing diamonds.

Risks Associated with IGI IPO

While IGI has several strengths, it’s important to consider the risks before making an investment decision:

1. Legal Proceedings: There are outstanding legal proceedings involving IGI and its subsidiaries, which could impact the company’s financial stability if the judgment goes against it.
2. Dependence on Key Customers: A significant portion of IGI’s revenue comes from its top 15 customers. Any loss of business or reduction in orders from these customers could adversely impact IGI’s financial performance.
3. Geographical Concentration: Most of IGI’s revenue is concentrated in Gujarat and Maharashtra. Any disruption in the business environment in these regions could negatively impact the company’s operations.
4. Subjectivity in Grading: While IGI uses a standardized grading system, the subjective nature of diamond grading poses a risk of variations in judgment, which could affect the company’s reputation if deviations occur.
5. International Acquisitions: IGI intends to use the IPO proceeds for acquisitions of IGI Belgium and IGI Netherlands. Managing acquisitions in international markets could present operational and integration challenges.

IPO Objectives

The primary objectives for the IPO are:

1. Acquisition of IGI Belgium and IGI Netherlands: The company plans to acquire IGI Belgium and IGI Netherlands from the promoter BCP Asia II TopCo Pte Ltd for ₹1,100 crore.
2. General Corporate Purposes: The remaining funds will be used for corporate expansion and operational needs.

Valuation and Pricing

The IGI IPO is priced between ₹397 and ₹417 per share. Based on its financials and growth prospects, the IPO is priced at a fully priced valuation. Considering IGI’s leadership position in the niche certification market, investors may find the price reasonable, especially given India’s dominant position in the global diamond industry.

Should You Subscribe to IGI IPO?

Dilip Davda: Subscribe

Dilip Davda, an experienced IPO analyst, has recommended subscribing to the IGI IPO, citing its strong growth prospects and the company’s leadership in the global gem certification industry. IGI’s steady growth in revenue and profit, combined with its dominant position in the diamond certification market, makes this IPO an attractive investment opportunity for long-term investors.

Investment Prospects

• For Long-Term Investors: IGI offers bright prospects, particularly in the laboratory-grown diamond segment, which is poised for significant growth.
• Risk Factors: Potential risks include legal proceedings, customer concentration, and geographical exposure to India. However, IGI’s market position and growth trajectory outweigh these risks for most investors.

IPO Recommendations

International Gemmological Institute IPO Registrar

For any inquiries related to the IPO process, the registrar for the International Gemological Institute IPO is Kfin Technologies Limited.

• Phone: 04067162222, 04079611000
• Email: igil.ipo@kfintech.com
• Website: Kfintech IPO Status

Conclusion

The IGI IPO presents an exciting opportunity for investors looking to tap into the growing diamond and jewellery certification industry. With a solid financial track record, a market-leading position, and backing from Blackstone, IGI is well-positioned to continue its growth. However, investors should carefully consider the risks involved, particularly in terms of legal proceedings and customer dependence. For long-term investors, this IPO offers promising prospects.