The International Gemmological Institute (IGI) shares hit a 10% lower circuit on 3 March 2025. The company provides authenticity certificates for diamonds and gemstones. Currently, it is trading at ~INR 366 per share. It is the lowest level since listing. The numbers also reflect this severity—IGI’s stock has fallen by approximately 23% from its issue price.

Revenue Growth Fails to Impress

The primary culprit behind the sell-off in IGI shares? Sluggish revenue growth. IGI’s Q3FY25 numbers did little to inspire confidence, with consolidated revenue rising just 6% YoY to INR 190.29 crore. Sequentially, the company barely moved the needle, inching up from INR 189.2 crore in Q2FY25. While growth is growth, the market was expecting more, and the tepid performance set off alarm bells about IGI’s long-term trajectory.

Lab-Grown Diamonds: A Double-Edged Sword

A key factor behind the revenue stagnation is IGI’s increasing exposure to lab-grown diamonds. While this segment has boosted certification volumes, it brings its own challenges—lower revenue per carat and volume-led discounts that squeeze margins.

Adding to the strain, the natural diamond industry faced headwinds in the festive quarter. Major manufacturers hit the pause button, with production shutdowns extending 15-20 days, twice as long as last year. This slowdown was mirrored in weaker studded jewelry sales from leading jewelers, further dampening IGI’s revenue momentum.

Stock Struggles Post-Listing

IGI made its stock market debut on 20 December 2024; the stock was listed with a 22.3% premium at INR 510 per share. However, IGI IPO couldn’t ride this wave for long and after reaching its highest level of INR 642.30 per share on 1 January 2025, IGI shares declined 43% from their peak. In the 3 March 2025 trading session, IGI stuch in 10% lower circuit, trading volume is 3X of its 30-day average. This clearly indicates the bearish sentiment of the investors.

Financials

Despite the revenue concerns, IGI did deliver profit growth, albeit modestly.

• Profit After Tax (PAT) climbed 3.6% QoQ to INR 111.68 crore, marking a 26.8% YoY increase.
• EBITDA (earnings before interest, tax, depreciation, and amortization) held steady sequentially but saw a 9.6% YoY rise, hitting INR 141.89 crore.
• EBITDA margins were 74.6% in Q3FY25, barely budging from 74.7% in Q2FY25, but improving over the 70.3% reported in Q3FY24.

The numbers suggest IGI is holding its ground profitability-wise, even as revenue growth lags behind expectations.

European Expansion: A Mixed Bag

A major corporate move in December 2024 was IGI’s acquisition of its European sister concerns in the Netherlands and Belgium for INR 1,300 crore. This deal, funded by IPO proceeds, was expected to create synergies and boost global operations.

So far, the results have been a tale of two cities:

• IGI Netherlands BV has delivered steady growth.
• IGI Belgium BV, however, has struggled, weighed down by geopolitical turmoil from the Russia-Ukraine war, which has disrupted servicing in the US market.

Management remains optimistic about a turnaround, but until the Belgium unit finds its footing, it remains a drag on overall performance.

Investor Sentiment: Institutions Pull Back, Retail Steps In

Domestic institutional investors (DIIs) reduced their stake from 7.75% to 5.88% by the end of December 2024. As always, retail investors increased their share from 5.33% to 6.84%. This indicates that institutional investors are taking a cautious stance while retail investors are buying relentlessly.

The Bigger Picture: Industry Trends & IGI’s Edge

The diamond industry is evolving, shaped by changing consumer preferences and technological advances. Key trends to watch include:

• Surging demand for lab-grown diamonds, driven by affordability and sustainability.
• Growing need for certification services, as transparency becomes a priority for buyers.
• Increasing adoption of tech-driven gemology solutions.

IGI’s global footprint—with 31 laboratories and 18 Schools of Gemology across 10 countries—positions it well to capitalize on these shifts. Its varied service formats, including IGI Labs, In-Factory Labs, and Mobile Labs, provide a competitive edge in an industry undergoing transformation.

Final Thoughts

The decline in IGI shares is not entirely surprising. In the current scenario, several companies have witnessed a drop in their stock prices. Foreign Institutional Investors (FIIs) have been selling heavily over the past two months which causes many stocks to hit record lows. Due to this downturn, investor sentiment has also weakened slightly and they are proceeding with caution.

Investors are anxious about slowing revenue growth, geopolitical uncertainties, and increasing reliance on lab-grown diamonds. All these factors are exerting selling pressure on IGI’s shares. Catalyzed by FIIs selling.

For investors, there is a situation of wait-and-watch. IGI shares are in oversold territory; any positive trigger could be a turnaround.

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