Some big Indian lab-grown diamond companies no longer need to send their stones to an International Gemological Institute (IGI) office for grading.

IGI India has established “laboratory setups” inside the factories of high-volume diamond growers, often using the producers’ employees and equipment, it said in a draft prospectus, filed last month in India.

IGI began offering the services in 2021. As of March 31, it had 12 in-factory setups in India and one in the United States, according to the filing.

“The certification services through our in-factory and mobile laboratory setups are performed on-site at the premises of our customers,” said the prospectus. “The in-laboratory setups are equipped with the necessary equipment supplied by our customers, and are staffed with our gemologists and employees of our customers, who attend trainings provided by us on certain basic steps of the certification process.”

This arrangement “helps cement our relationship with these customers, entrench us within the facilities of our customers, improve operational efficiencies, and make it challenging to replace us.”

While it’s not unusual for labs to do grading at sites other than their own facilities—particularly at trade shows—some industry veterans say “in-factory” operations could create the appearance of bias, particularly when the grower’s employees are engaged in the process.

The IGI prospectus acknowledged the arrangement carries certain risks, but said that IGI is taking precautions.

“As certification via our in-factory and mobile laboratory setups [is] conducted on the premises of our customers, we may also have less oversight over third parties who have access to our customers’ premises,” it said. “While we conduct quality checks and periodic calibration of our gemologists to reassess and adjust their grading techniques, such measures may not be effective in preventing all instances of grading errors or fraud by gemologists or third parties.”

IGI said it hopes to increase its in-factory business.

“We will strive to further expand our in-factory laboratory presence as new participants enter the laboratory-grown diamond manufacturing segment and [we] develop robust relationships with them,” the prospectus added.

One chart in the prospectus starkly illustrates the recent gains in lab-grown diamond production and popularity. In 2021, 35% of IGI’s revenue came from lab-grown diamond reports, versus 33% from natural diamond reports and 30% for finished jewelry and colored stones. In the first three months of 2024, 60% of IGI’s revenue came from lab-grown diamond reports, while 19% was from natural diamond reports, and 20% from jewelry and colored stones.

IGI declined comment to JCK, citing the quiet period before a company goes public.

IGI India is seeking $477 million from its initial public offering. Proceeds from the IPO will go toward the purchase of IGI Belgium and IGI Netherlands.

“The overseas businesses had to be brought under the Indian arm by acquisitions,” a source told Money Control, an Indian publication. “They could have done it in two ways. The Indian entity could have acquired those overseas businesses by raising short-term debt and then it could have filed for an IPO and used the IPO proceeds to pay off the debt. But this would have meant that the Indian entity would have had to bear the costs of raising the debt, servicing the interest cost, and the acquisition process would have taken its own time which would have delayed the IPO.”

The source said IGI is currently valued at $4 billion.

BCP Asia II Topco, a Singapore-based subsidiary of Blackstone Group, bought IGI in May 2023 for $569.65 million. The IPO bid has come little more than a year after that purchase, sooner than some expected, and seems like an attempt to take advantage of India’s super-hot market for IPOs.

(Photo courtesy of IGI)

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