Surat diamantaires grappling with rising default cases

Surat: The coronavirus pandemic that forced a global lockdown has resulted in a weak demand and severe liquidity crisis in diamond cutting and polishing sector of Surat. But now the diamond industry in grappling with another problem; increase in payment defaults.
In the last fortnight, about five defaults have been reported in Mumbai and Surat involving diamond merchants and a reputed angadia (local courier) firm worth over Rs 500 crore. Over 250 diamantaires in Surat and Mumbai have suffered huge losses that has resulted in series of defaults.
Barely 20 days after about 20% of the diamond units in Surat resumed operations, a diamond merchant operating from the Bharat Diamond Boursee (BDB) in Mumbai defaulted on payments to the tune of Rs 80 crore due to its creditors in Surat, Mumbai and Antwerp.
The industry got yet another shock on June 19 when the owners of a reputed angadia firm in Surat’s Bhawani Wad area, went bust with Rs 400 crore due to more than 100 clients from the diamond industry in Surat and Mumbai.
Kirti Shah, a diamond exporter in Mahidharpura told TOI, “The coronavirus pandemic and the lockdown across world markets has resulted in the delay in the payments from the buyers. Due to the weak demand, the prices of polished diamonds have crashed by almost 10-15%. There is severe liquidity crisis in the industry, which is resulting into the defaults.”
Shah added, “Only 35% of the units, majority of the big and medium units, have started operations post-lockdown. There are many diamond merchants who are yet to open their offices in the diamond markets, raising further speculations among the diamond circles.”
Industry sources said that the increase in default cases will further destabilise the diamond industry when only 35% of the units have resumed operations that too with reduced capacity. The banks will continue to restrict lending to the sector over the next few months due to the impact of the coronavirus pandemic on the export of polished diamonds and jewellery from India.
Diamond industry analyst, Aniruddha Lidbide told TOI, “Coronavirus pandemic is worse than the global economic downturn of 2009. Diamonds and jewellery are the luxury items and will always come last on the purchase list of the consumers in the world when the economies are badly affected and people are losing job.”
Lidbide added, “This is just the beginning of the default case as the industry may witness more such defaults in the coming months.”
Distress Signal
Jun 10: A diamond merchants in Mumbai’s BDB defaulted on Rs 80cr payment
Jun 19: A reputed angadia firm headquartered in Surat defaulted on Rs 400 cr due to clients
Jun 21: A diamond merchant in Mumbai defaulted on Rs 10 cr payment
Jun 22: A rough diamond dealer in Surat defaulted on Rs 5 cr payment
Jun 24: A diamond merchant in Surat defaulted on Rs 11 cr payment