Operator: Ladies and gentlemen, good day and welcome to the Q2 and H1 FY27 earnings conference call of International Gemmological Institute (India) Limited hosted by MUFG Intime. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sumeet Khetan from MUFG Intime. Thank you, and over to you, sir.
Sumeet Khaitan: Good evening, everyone. I welcome you all to the earnings conference call to discuss Q2 and H1 FY27 results of International Gemmological Institute (India) Limited. To discuss the results we have from the management, Mr. Tehmasp Printer, MD and CEO, Mr. Eshwar Iyer, CFO, and Ms. Natasha Kedia, Head of Investor Relations and Public Relations. They will take you through the results and the business performance, which we will proceed for Q&A session. Before we proceed with the call, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risks and uncertainties. For more details, kindly refer to investor presentation and other filings that can be found on the company's website. With this, I now hand over the call to the management for their opening remarks. Over to you, sir.
Eashwar Iyer: Tehmasp, you can start.
Operator: Sir, kindly unmute your line and go ahead, please. We lost the connection for Mr. Printer. Just give us a moment while we have them online. We have Mr. Printer again with us on the line. Please proceed.
Tehmasp Printer: Yeah. Good evening, ladies and gentlemen, and thank you for joining the IGI's Q2, H1, FY27 earnings call. I trust that you had the opportunity to review our results and investor presentations, both of which are available on the stock exchanges as well as on our website. I will cover two things today. First is the quarter, what we have been seeing in the market and in lab-grown diamonds in particular. Eshwar will take you through the numbers in detail later on. This has been the best quarter in IGI's history. Our volumes, our revenue, our EBITDA, and our profits were all the highest we have ever reported. We issued 4.35 million reports in the quarter. That is 26% more than the same quarter last year. in India, the volumes grew 19% on a year-on-year basis. Revenue from operations grew 31% to INR 3,980 million.
Tehmasp Printer: For the first half of the year, revenue grew 27%, EBITDA grew 34%, and profit after tax grew 37%. The growth has come from all parts of the business. Lab-grown grew the fastest. Natural diamonds also grew, even though the natural market did not. Colorstone growth has been led by AGL, and again, Eshwar will give you the segment numbers later on. Let me start by saying a few words about the market. In India, the festive season has started. Diwali is on 8 November this year. Last year it was on 20 October, and some of the festive stocking that happened in September last year is happening in October this year. Even so, demand through the quarter was healthy, and the trade has stocked up well for the season. The initial trends in October, driven by the festive demand, are also seeing good traction.
Tehmasp Printer: Gold prices have been high and volatile. The buyers of the natural diamond jewelry are taking a little longer to decide. As such, the results of natural jewelry certification grew only 3% in this quarter. Lab-grown is not seeing this hesitation at all. At our Investor Day in August, we spoke about lab-grown diamonds under three heads, supply, retail, and buyer. Let me take you through each one briefly so that we can see what we saw in this quarter. On supply, large Indian growers are adding reactors and are doubling their capacity in 3 years. Supply is at its base and not at its peak. In the quarter, lab-grown loose certification grew 37%, signaling a robust supply ramp-up. On retail, certification demand is created at the retail end.
Tehmasp Printer: The certificate costs less than 2% to 3% of the retail price, and it is the very reason why consumers buy with confidence. In India, lab-grown chains are opening up stores, and established jewelers have also launched their own lab-grown brand. In the United States, more than 50% of all bridals are now lab-growns, and other markets are likely to follow this trend. Our lab-grown jewelry certification grew 47% in this quarter as retailers stock up for the season. On the buyers, for many families, lab-grown diamond is the very first diamond that they buy. With increase in household income, they buy more pieces, bigger stones, and over many years, over the coming years, they will move to natural diamonds. We certify natural diamonds. We certify lab-grown diamonds, color stones, and to the same standards.
Tehmasp Printer: It is the IGI certificate that makes the lab-grown diamond a diamond, and it is the same certificate that also protects the value of a natural diamond. Furthermore, last month in Bombay, the Union Home Minister, Shri Amit Shah, asked the industry to keep the entire lab-grown diamond chain in Indian hands, from machines to the showrooms. He said the lab-grown market could grow many times over its current size. We welcome this. IGI was the first international laboratory to certify lab-grown diamonds way back in 2005. A market of this size needs an independent standard that the whole world will accept. That is what IGI provides, and that is the role that we intend to keep. Our priorities continue to be focused on, one, accelerate the natural diamond growth and gain market share. The aim is to grow faster than the market and gain market share.
Tehmasp Printer: In a market that did not grow our natural loose certification grew 8%, where our share is the highest in the industry. Second point, continued leadership in lab-grown diamonds. I have covered the numbers. What matters now is the capacity ramp-up and the service through the festive peak, for which we are well-prepared. Scale-up on gemstone acquisition through the integration of AGL. AGL has been part of the IGI Group since January. We are building colored stone capabilities in our other laboratories using AGL methods, and we have started offering the services to our jewelry clients. The IGI colored gemstone strategy is being shaped in collaboration with AGL, with technical review of IGI process and reporting along with review and standardization of testing equipment. While we have seen some green shoots, we are working to build a continued momentum in this space, including dedicated setups of large customers.
Tehmasp Printer: AGL itself is ready for a growth charter and expansion into the key gemstone markets. The continuous investment on the brand. We are taking IGI from a name that the trade trusts and recognizes to the consumer who will ask for it. We initiated our B2B, B2C marketing initiatives in the first quarter through an IPL partnership. We have further expanded in those initiatives through targeted media campaigns consistency in its quarter across geographies, results of which are indicated below. The marketing ROI, we have created clear KPIs to call out. Brand search volume, IGI is up by 66% since March 2026. Reach, we are reaching 20 million unique audience every quarter consistently. Overall, 150 million plus views on our campaigns on a year-to-date basis. We have upped our ante on facilitating key joint campaigns to accelerate festive sales for retailers.
Tehmasp Printer: For example, Puja campaign in the West Bengal on natural diamond jewelry. We won in the NCR with a consortium of LGD Jewelers. We are building capabilities to create regional content and strategy, both within India and across the key global geographies to build brand resilience with the end customer. The fifth point is leveraging AI and machine learning for operating effectiveness. AI-based work allocations and scheduling is now in the use of our laboratories. The same team is grading more stones more efficiently and faster. The grading standards itself always remains constant and do not change. Our network also keeps growing. We started operations in Italy this year. Saudi Arabia is being prepared. In September, we set up a company in Botswana. In our overseas laboratories, certification revenues grew by 31% without AGL, and the business is increasingly profitable.
Tehmasp Printer: With that, I would now like to invite our CFO, Mr. Eashwar Iyer, to take you through the financial performance for the quarter and the half year. Eashwar, over to you.
Eashwar Iyer: Thank you, Tehmasp, and thanks everyone for taking the time for joining today's conference call. I will start with an update for the quarter, followed by an update for the H1, and then we will also talk of some balance sheet metrics. I am talking about the consolidated group performance for the quarter. The company has reported strong quarterly results, 4.35 million reports, which is a 26% growth year-on-year. Total revenues from operations at INR 3,980 million is up 31%. Certification revenue at INR 3,875 million, up 32%. EBITDA for this quarter clocked in at INR 2,445 million, growing 39%, with margins at 61.4%, which is 340 basis points above the same time last year. PAT at INR 1,858 million is up 43%. This was primarily driven by robust revenue growth across all our segments, namely LGD, which grew 37%, LGD jewelry growing 47%, gemstones and other certification growing 331%.
Eashwar Iyer: This quarter has also seen a strong performance from our subsidiaries. Revenue growth during this quarter clocked in at 49%. If we were to exclude the AGL consolidation on a like-to-like basis, the subsidiary business for this quarter has grown 31%. The AGL acquisition enabled an incremental 3% revenue growth. I mentioned about certification revenue growing 32%. If you were to discount the AGL consolidation, that base business delivered 29% revenue growth for the quarter. The ARP for the quarter reported at INR 891, registering a 4% improvement versus the previous year. The AGL consolidation gave us 2 percentage points gains, and the base business ARP has grown 2% on a higher LGD loose stone mix. On a sequential quarter basis, the business has grown around 8%, with EBITDA growing at around 9% for the sequential quarter.
Eashwar Iyer: Coming to the EBITDA performance at INR 2,445 million, reflecting a growth of 39% compared to the previous year. EBITDA margin for the quarter stood at 61.4%, an improvement of 340 basis points on a year-on-year basis. The AGL acquisition has contributed 2% of the incremental growth to the EBITDA. Consequently, PAT reported at INR 1,858 million, growing 43% to previous year. PAT margin stood at 46.7% for the quarter, which is up 400 basis points over the previous year. I will now cover the India standalone results for the quarter. In terms of revenue, certification revenue for the period stood at INR 3,040 million, growing 28%, supported by strong volume growth of 19%. This was primarily driven by strong revenue growth across our core segments, namely LGD, growing 40%, LGD jewelry at 29%, gemstones and other certification grew 343%.
Eashwar Iyer: Total revenue from operations for the quarter stood at INR 3,056 million, registering a growth of 27%. ARP for the quarter reported at INR 827 versus the previous year of INR 773, which is up 7%, driven by an increased mix of LGD stones, which is up 6%. EBITDA growth reported at INR 2,123 million, reflecting a growth of 21% compared to the previous year. EBITDA margin stood at 69.5% versus 72.8% in the previous year. It is down 340 basis points. Obviously, this has been driven by certain investments that we made from an employee leadership standpoint, plus additional marketing plus commission expenses, which we have talked about in the previous quarter as well. Consequently, PAT reported at INR 1,697 million, growing 22% compared to the previous year period. PAT margin stood at 55.5% for the quarter versus 57.8% in the previous year. I am now covering the H1 results summary.
Eashwar Iyer: I start with group performance. The H1 has delivered an exceptional revenue growth of 27% from a revenue standpoint, and an EBITDA growth of 34%, with PAT growth at 37%. The group delivered a revenue from operations of INR 7,688 million, a 27% year-on-year growth, led by a 22% volume growth. Revenue growth has been led by a 31% growth in LGD loose stones, 46% growth in LGD jewelry, and a 261% growth in gemstones and other certification. AGL revenues for H1 contributed to 3% of this growth, with the base business therefore growing 24%. ASP for H1 was reported at INR 945 versus INR 905 for the corresponding previous year, is up 4%. AGL contributing 2% of this increase and the base business ARP growing 2% on the increased LGD mix.
Eashwar Iyer: EBITDA delivery at INR 4,683 million is growing 34%, with margins at 60.9%, which is up 310 basis points over the corresponding period. AGL acquisition has of course contributed another 2% of this incremental growth to the EBITDA. PAT delivery at INR 3,516 million, growing 37%, with margins at 45.7, which is up 330 basis points over the corresponding period. Coming to the India standalone performance for the H1. The India business has reported revenues from operations at INR 5,918 million, growing 25%, with volumes growing 20%. The revenue growth has been led by a 35% growth in LGD loose stones, 32% growth in LGD, and a 245% growth in gemstones and other certification. ARP for H1 reported at INR 847 versus INR 814, which is up 4% on an increased LGD mix, which is 5% up versus the same time last year.
Eashwar Iyer: EBITDA delivery at INR 4,093 million, growing 18%, with margins at 69.2% versus 72.9%. PAT delivery at INR 3,243 million, growing 17%, with margins at 54.8 versus 58.2. A drop of 340 basis points in line with whatever I have articulated earlier relating to additional investments in people as well as on marketing initiatives. From a balance sheet perspective, as of the quarter close, the group reported a cash and bank balance of INR 1,0749. For ease, it is INR 1,074 million of cash and bank balance. Operating cash flow for the half year was INR 4,157 million, 89% of the EBITDA and 118% of the PAT Delivery helped by a working capital release of around INR 662 million, as receivables have fallen from a peak of around INR 2,885 million to INR 2,402 million.
Eashwar Iyer: On capital, the board declared a first interim dividend of INR 2.55 per share in August, which was paid in September. Our priorities as articulated during the Investor Day remain unchanged. We invest in capacities, geographies, and technology. Selective bolt-on acquisitions and return surplus cash, which the board reviews with each set of results. Coming to the outlook for the full year. In May, we have given a guidance of 15% revenue growth and a 20% EBITDA growth for the full year 2027. However, given the H1 performance, which has come well ahead, with revenues growing 27% and EBITDA growing at 34%. This was driven by strong industry tailwinds and from our own strong operational performance with operating leverage, taking EBITDA growth ahead of revenue growth. The tailwinds are still with us and so is the strength of our execution.
Eashwar Iyer: We therefore expect to keep outperforming for the full year as well, similar to the H1 delivery. With that, I conclude my remarks and I open the floor for any questions.
Operator: Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question, you press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Harit Kapoor from Investec. Please go ahead.
Harit Kapoor: Hi, good evening. Congrats on excellent set of numbers. Just had two or three questions from my end. First was, this sharp pickup in the LGD revenue growth. While we have seen this in the past as well, the numbers are very strong this quarter. I just wanted to understand, is it a function of reordering in terms of before festive? Because this time festive has actually got a little bit delayed. Should we expect some tapering down in Q3, given that it is a very sharp increase? Similarly, on the natural side as well, given that the base was actually reasonably strong, should we expect a further pickup in growth in the opposite direction? Should we take a higher growth as the festive has moved into Q3? Just some nuances on what has driven these growths would be very helpful.
Harit Kapoor: That is my first question.
Eashwar Iyer: Yeah. Hi, Harit. It is good to hear from you. Harit, I think a couple of questions. One is on the LGD growth and the second one is on India growth. Going back to what we articulated during the Investor Day, we had actually mentioned the fact that there is significant capacity addition that is happening at the grower end, right? From that standpoint, the momentum for the business continues from that standpoint. So we have seen business at more or less the same levels. If you were to look at the Q2 numbers at the consol level-
Harit Kapoor: Yeah.
Eashwar Iyer: Some at INR 2,111 million of LGD revenue, which is more or less same as what we delivered in Q1, which was INR 2,095. From that standpoint-
Harit Kapoor: Yeah.
Eashwar Iyer: We are starting to see scale-up coming into our laboratories for certification. We don't anticipate any slowdown as far as lab-grown business is concerned for the coming quarters as well. This is a tailwind from the industry given the capacity addition that's happened at the grower end.
Harit Kapoor: Got it.
Eashwar Iyer: Coming to natural diamonds, the business has showed 8% growth this quarter. Sequentially, we are seeing a 5% growth. From an H1 standpoint, this business has grown 7%. We had a slow start to the year, as we had spoken in the last quarter, and we are starting to see some traction as far as natural diamond business is also concerned. We expect this momentum to continue into the next two quarters as well.
Harit Kapoor: Got it. The second bit was again on LGD. Are you seeing a slightly more broad-based growth? I know growers are doing well in terms of the capacity additions, but the customer set, which is the jewelers, are you seeing a more broad-based global growth now? Historically, it was kind of centered around the US, but are you seeing it being more broad-based now?
Eashwar Iyer: Two things here, Harit. LGD jewelry this quarter has grown 47%, and H1 is 46%. So the consistency across both these quarters versus previous year is well-established. As we have discussed again during the investor call, there are markets opening up in Europe, Latin America, et cetera, and also Australia for that matter. I think that trend is continuing as far as the performance on LGD jewelry segment is concerned.
Harit Kapoor: Perfect. Last bit was on, you spoke about guidance that H1 has been far ahead of your earlier stated kind of trajectory. Would you like to articulate what looks like your new kind of target number for the year, if that is possible?
Eashwar Iyer: That is what I just mentioned on the call, Harit. We expect to keep outperforming for the full year as well, in lines with what we have delivered in H1. So we expect the business to, obviously therefore, beat the guidance that we have given for the year.
Harit Kapoor: So H2, you are saying will be higher than the 15% revenue and 20% EBITDA growth as well.
Eashwar Iyer: Yes.
Harit Kapoor: That is what you are trying to say.
Eashwar Iyer: That is right.
Harit Kapoor: Okay. Thank you. Wish you all the best. Thank you.
Operator: Thank you. The next question is from the line of Harish Advani from Axis Capital Limited. Please go ahead.
Harish Advani: Hi. Congrats on a great set of numbers. My first question was on the guidance, as asked by the previous participant. Since we are anyways clocking well ahead of the 15% revenue growth and 20% EBITDA growth, can we re-look the guidance because, we are anyways kind of overshooting it pretty significantly? That's my first question.
Eashwar Iyer: Yes, Harish. I think I just explained that. We expect to outperform for the full year in line with what we have done for H1.
Harish Advani: Okay, so no change to the estimates. Okay, fine. The second question was on the-
Eashwar Iyer: Sorry, one second. We are saying that we are revising our 15% and 20% upwards, given the fact that H1 delivery has beaten our initial estimates for the full year.
Harish Advani: Yes, sure. My question was that to what are we kind of revising it to? That was my question.
Eashwar Iyer: Yeah. We are saying it is going to be similar to what we have delivered in H1 from a growth standpoint.
Harish Advani: Okay, perfect. Thank you. The second question was on the cash that we are generating. How are we planning to utilize this cash that we have accumulated so far? Because, since we are anyways an asset-light kind of business, are we thinking more in terms of, say, higher dividend payout, or do we have some acquisitions that we are kind of evaluating at the moment?
Eashwar Iyer: Yeah. So in line with what I have just mentioned, the priorities as far as CapEx allocation remains the same, investing for growth. We have recently ventured into Italy and also we are venturing into Saudi Arabia. So growth takes the first priority, followed by M&A opportunities and then dividend payouts. So very recently, as recent as September, is when we made this dividend payout. And again, we get guided by what the board decides on some of these dividend matters. So you should expect that sequence to continue to follow for the subsequent quarters as well.
Harish Advani: Okay, perfect. Those were my two questions. Thank you and all the best.
Eashwar Iyer: Thank you.
Operator: Thank you. The next question is from the line of Jitaksh Gupta from Tekri Investments. Please go ahead.
Jitaksh Gupta: Hi, sir. Thank you for the opportunity. I just have one question. Sir, we are constantly beating revenue, EBITDA and PAT guidance, also getting operating leverage at consolidated basis. I just wanted to understand, how do you see the revenue for FY28? I am not looking for any specific guidance, but just trying to understand the order pitch from your side. What will work for us, what is working for us? This is the question.
Eashwar Iyer: Yeah. Mr. Gupta, as I mentioned, the tailwinds are extremely strong, and we have seen the strength of our execution capability in the results that got delivered during H1. We therefore are expecting this trend to continue for H2, and we will outperform for the full year as well.
Jitaksh Gupta: Sir, from a broader perspective, any guidance you can provide from a FY28 point of view? Just trying to understand a broader picture, not a specific guidance, but what do you assess about the industry? What do you think about the industry?
Eashwar Iyer: As I mentioned, it is going to be same in line with what we delivered in H1.
Jitaksh Gupta: Okay, sir. Thank you so much.
Operator: Thank you. The next question is from the line of Ritesh Gandhi from Discovery Financial Services Private Limited. Please go ahead.
Ritesh Gandhi: Hi, sir. I just had a couple of questions. One was, as the price of lab-grown continues to go down, our percentage of the cost of the overall diamond is actually increasing. Is there some particular point at which there is going to be a pushback on, do we really need certifications for something that is not really all that expensive?
Eashwar Iyer: Hi, Ritesh. Yeah. I think you should refer back to our Investor Day deck. There are two or three aspects which were covered in that conference. Number one was the stability of the wholesale price over the last couple of years. It settled in the 180 to 120 range. That was the articulation that we made in that presentation that day. Number two, the need for certification is driven by retail. If you were to look at the certification cost as a percentage to what it retails at, this is between 2% to 3%. From that context, we expect the business to continue with the current momentum. I think we have addressed this in the past in terms of where this business is headed, et cetera.
Eashwar Iyer: Given the fact that significant capacity is getting added and stability in the wholesale prices, we expect that the business is going to continue on a strong wicket for the forthcoming quarters.
Ritesh Gandhi: Got it. The other question was that, just looking at a few little channel checks I did across the industry, how important is our brand? Just want to understand what is driving our such a strong, dominant market share here. Is there a risk of a new player actually entering in here, offering it at a much lower cost and then just become acceptable?
Eashwar Iyer: Well, I wish that was as simple as you stated, Ritesh.
Ritesh Gandhi: No, it is not as simple. I am just asking the reason behind the barriers to entry here.
Eashwar Iyer: Yeah. There is an element of a first-mover advantage, which IGI has. We were the first to certify lab-grown diamonds. Number 2 is the fact that there is an element of trust and acceptance for a brand. That has got established over 50 years. These are the moats of this business, and given these strengths that we have from a competitive landscape, that's the reason why we lead in the segment that we are currently operating in.
Ritesh Gandhi: Got it. Just thinking, again, this is from my own understanding, is that, look, when we speak to people in the industry, obviously when it comes to let's say, like natural people, do value GIA, actually a lot. When it comes to LGD, obviously, people are going to you primarily.
Operator: Sorry to interrupt.
Ritesh Gandhi: Is there any-
Operator: Sorry to interrupt.
Ritesh Gandhi: Yeah.
Operator: Mr. Gandhi, due to time restrictions, please come back in the question queue for more follow-up questions.
Ritesh Gandhi: Okay.
Operator: The next question is from the line of Rajesh Jain from RK Capital. Please go ahead.
Rajesh Jain: Yeah, thanks. And congrats on a very strong set of numbers. My question is on the nature of the lab-grown diamond certification. So, your competitor, GIA, has moved away from the traditional four C's reporting for lab-grown diamonds towards a simplified premium or standard classification kind of reporting, right? So, what does your company see as the likely long-term market preference? Will the market opt for simplified classification or the detailed grading reports that you provide? And are customers willing to pay a premium for the detailed certification, or will they opt for the lower cost, simplified certification?
Eashwar Iyer: Okay, Rajesh. This is a long, drawn-out answer. Let me see how crisp I can be. There are a couple of elements that we need to understand as to the need for certification. One, the four C's establish the commercial value at which these goods get traded across the value chain. The specific color, the specific clarity, the cut, and the carat weight. These determine the commercial value at which these stones get traded, number one. Number two is, unless that sort of clarity is available to the consumer, he doesn't understand what he is buying. That is the reason the four C's have been established and been prevalent for the last 70 or 80 years. That is the foundation on which the diamonds are certified, and there is an acceptance for that certificate. It's not going to go away at all.
Eashwar Iyer: As an independent third party authenticator, we continue to believe that the four C's are a critical element to determine the quality of the diamond.
Rajesh Jain: Okay, so you are not seeing any traction towards or any demand for the simplified classification. Rather, you're seeing strong traction for the four C's based reporting.
Eashwar Iyer: You're right.
Rajesh Jain: Okay, thanks. Two more short questions. Just wanted to understand the meaning of your sentence when you say H2 will be similar to H1 growth rate. I have seen that the H1 growth rate has been closer to 27% in terms of revenue growth. On the full year basis, can we expect 25% revenue growth plus minus 2%? I just wanted to be clear whether I have understood your sentence correctly.
Eashwar Iyer: Okay, Rajesh. As I have articulated on the call, there are significant tailwinds for the business. There is significant capacity that is being added. As we get into this festive season, our performance for October continues to be rock solid. That is the reason why we are saying that we expect to outperform for the full year, similar to what we delivered in H1.
Rajesh Jain: Okay, so you would not like to call out a number like 25%, but you are just saying that it will be outperformance, basically, and it will be similar to H1 growth rate. Right. Sir, last question. Are you seeing more demand from the large chain stores or you are also seeing demand from individual jewelry stores going for LGD certification, specifically for LGD certification? Is the growth in end customers-
Operator: Sorry to interrupt, Mr. Jain. Due to time constraints, kindly come back in the question queue for more follow-up questions. The next question is from the line of Rajesh Shaw from BTH Capital. Please go ahead.
Rajesh Shah: Congrats on a strong set of numbers. My first question is that our ASP grew despite a strong growth in both LGD jewelry as well as loose stones. Is there an element of prices starting to grow for LGDs now? Is that the reason behind the ASP growth overall? My second question would be around the market.
Eashwar Iyer: One question at a time, Rajesh, one question at a time.
Rajesh Shah: Yeah.
Eashwar Iyer: Your first question, can you kindly repeat? I did not understand that.
Rajesh Shah: Yeah. Our ASP grew despite a very strong LGD jewelry as well as blue stone growth. I just wanted to understand, are prices for LGDs starting to go up now? That was my first question.
Eashwar Iyer: Okay. Rajesh, as I had just spoken to all of you all on the call, the ARP for the quarter is up 4%. 2% of that growth came from AGL. The balance 2% came from the base business, driven by a higher LGD mix. If you were to look at the LGD mix for this quarter, it was 54% versus 52%. That is the key driver for effectively a 2% increase in the ARP if you were to discount the AGL consolidation.
Rajesh Shah: Got it. My second question was around the market.
Operator: Mr. Shah? Mr. Shah.
Rajesh Shah: Yeah.
Operator: Due to time constraints, kindly come back in the question queue for more follow-up questions. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one per participant. The next question is from the line of Saania Jain from Care PMS. Please go ahead.
Saania Jain: Hi. Thank you for the opportunity, and congratulations on the good set of numbers. Just one question to understand more on the industry dynamics. With the rise of AI, how has the competitive landscape for IGI changed? Basically, can smaller labs now use AI to enter the field easily and offer the similar testing and analytical services that IGI offers, but at a lower cost? Just wanted to understand that bit.
Eashwar Iyer: Okay, Saania. From an AI/ML standpoint, the critical aspect is how do you build capability from a machine learning standpoint? The machine learning happens through the images that we capture in the lab and feed it to the machine for it to start interpreting the results, which is otherwise given by humans. That sort of expertise is with IGI. We have been certifying, as you said, some 4.5 million certificates is what we issued during this quarter. So that sort of data sits not with everybody across the globe. IGI is in the unique position to have this sort of images, et cetera, which can be therefore leveraged for machine learning and therefore introduction of AI into our processes to basically improve our productivity around turnaround times, et cetera. That is the end of year we are working on.
Saania Jain: Okay, got it. Thank you.
Operator: Thank you. The next question is from the line of Rohan from Dexter Capital. Please go ahead.
[Analyst] (Dexter Capital): Yeah, hi. Thanks for taking my question. I just have one question. The average realization, it fell 12% on quarter-on-quarter basis, and the presentation attributes it to 4% fall in the LGD loose stones. Can you please help me explain the mechanism? Because it is a bit counterintuitive for me since the LGD certification should cost lower than the natural diamond certification. If you can help me understand the mechanism, it will be really helpful.
Eashwar Iyer: Yeah, Rohan. What we are talking here is from a revenue mix standpoint and not a cost standpoint. The mix for the quarter was 4% lower, and the jewelry mix is up around 3% or 4%, if you were to combine both natural diamond jewelry and LGD jewelry. This is the trend that we normally see during this quarter, which is Q2, Q3, given the fact that we are entering a festive season. So that is the context in which you must look at this 12% decline on ARP from a sequential quarter standpoint.
[Analyst] (Dexter Capital): Got it. Thanks.
Operator: Thank you. The next question is from the line of Jinal Sheth from Awriga Capital Advisors LLP. Please go ahead.
Jinal Sheth: Good evening. Congrats for a good set of numbers. Also, I just require a couple of clarifications. Is it true that we have given rights to the top five LGD manufacturers in Surat, the right for printing certificates?
Eashwar Iyer: Mr. Sheth, can you just repeat your question?
Jinal Sheth: Yes. What I am asking is that, have we given printing certificate rights to the large five lab-grown diamond manufacturers in Surat?
Eashwar Iyer: No, Jinal, we haven't given any rights to anybody to print our certificates.
Jinal Sheth: Okay, fine. My second clarification is that I do pick up from speaking with multiple diamond and LGD guys in the business that there is grading inconsistency in regards to when it comes to IGI certification. Can you clarify on the same?
Eashwar Iyer: As we have articulated in the past, the grading is a subjective element from the four C's that we grade as far as a diamond is concerned. Apart from the carat weight, which is an objective analysis, the other three aspects are subjective. However, given the way our organization is structured, depending on the size of the stone, et cetera, there are multiple pairs of eyes which go before a final certificate is issued. It is not that a single grader can gauge a stone and a certificate gets printed. We are an ISO-accredited organization. There are strong internal processes that have been built over the last 50 years of our existence. There is multiple layers of check before a final stone passes our system and a certificate is issued.
Eashwar Iyer: From that context, we remain extremely confident on the capabilities and the processes that we run within the organization to deliver consistency of grading results across all our businesses.
Tehmasp Printer: Can I pipe in now? Can you guys hear me?
Eashwar Iyer: Sure, Tehmasp.
Operator: Yes, we can hear you.
Tehmasp Printer: Yeah, I have been trying to get in, but I do not know, somehow. Anyway, see, the thing is, at IGI, we are the only laboratory which has been certified by ISO for the last 18 years. ISO has a very stringent accreditation process where they govern the entire process as well as the technical ability. We also get certified by RJC, which is Responsible Jewellery Council worldwide, and they look into the social aspects of our business. Both of these, we are the only laboratory to have defined the entire process. Furthermore, see, where lab-grown is concerned, we are the only laboratory in the world to acknowledge it as a diamond, because both are exactly the same. Natural diamond is earth mined, laboratory diamond is man-made, but both are diamonds.
Tehmasp Printer: We, as a principle, being a third-party independent certification body, we emphasize that we will grade diamonds, and we will keep to our integrity. We will not lesser the diamond, like lab-grown, to something which is mundane. It is less expensive than natural diamonds, but it is still an affordable luxury. There are consumers in the world who would love to have the desire to have diamond, and today, lab-grown gives them the opportunity to buy a diamond, which is also certified by IGI. IGI stands its ground that we will certify all gemstones and diamonds and give the origin of the diamond. Of course, in the diamond business, we will give the four C's, which is an age-old, 100-year-old certification criteria, which has been given to the world.
Tehmasp Printer: At IGI, we will give the four C's, we will give the origin, and that is what we have placed our integrity and the trust to defend for the consumers.
Jinal Sheth: I really appreciate your answers to that extent.
Tehmasp Printer: Yeah.
Jinal Sheth: GIA, the leader in US and Europe, they recently let go-
Tehmasp Printer: Yeah.
Jinal Sheth: Of the four C's process. Isn't it true, sir?
Tehmasp Printer: Yeah.
Jinal Sheth: And they being so large and we are literally a small scale of theirs, I just kind of wonder that US, Europe being so large and GIA and the HRD, the Belgian beings. Somewhere I heard that our grading compared to them, there is a gap, and then why. So yeah, just some comments on that, if I may.
Tehmasp Printer: Yeah, no, there is no gap. In fact, we are consistently drawing a straight line across the four C's. I would say that because of the humongous quantities that we certify, we get into the AI and ML mode, and more and more accurate results are being given to the consumer, to the consuming world.
Jinal Sheth: Great. Thank you so much for the detailed answers.
Tehmasp Printer: Thank you.
Operator: Thank you. The next question is from the line of Ali Asgar Shakir from Motilal Oswal Mutual Fund. Please go ahead.
Ali Asgar Shakir: Yeah, thanks for the opportunity. Hi, Ishu and Tapan. I do not know if my question has already been asked. I am sorry I joined a little late. I just wanted to check on the guidance. So, we had earlier given the guidance of high teens revenue growth and EBITDA PAT growth. Now H1 has been almost 1.5 times of what you had guided. In fact, EBITDA and PAT have been almost close to two times of the growth that you had guided. If you can just share some color in terms of what we should expect for H2. If you hold your guidance, then H2 can be significantly lower, or you think that guidance will be updated.
Eashwar Iyer: Okay, Ali, I think you have joined the call a little late.
Ali Asgar Shakir: Yes. Sorry, I joined a little late.
Eashwar Iyer: So we have addressed this to a couple of participants. Yes, you are right. We have obviously over-delivered versus whatever was our initial estimate. This is obviously driven by some significant tailwinds that we are seeing in the industry. Some of this was articulated during the investor call as well, where we had spoken about significant capacity additions, et cetera, happening in this segment. That is enabling us to therefore see these numbers the way they are panning out. Given the fact that we had such a strong H1 performance, we are upping our guidance to say that we expect to keep outperforming for the full year in line with the performance for H1.
Ali Asgar Shakir: Understood. Got it. Thank you. This is very helpful, and sorry for repeating that question. Thanks a lot.
Eashwar Iyer: Thanks, Ali.
Operator: Thank you. The next question is from the line of Divya Daga from VGSBL. Please go ahead. Ms. Daga, kindly go ahead with the question. Ms. Daga, please unmute yourself. As there is no response, we move on to the next participant. The next question is from the line of Pankaj from AVUS Capital. Please go ahead.
[Analyst] (AVUS Capital): Yeah. Very good evening, and congratulations to the entire team for a strong set of numbers. A very quick question. We saw EBITDA jump up almost 3.4% in this financial year. This is in spite we saw a dip in India's EBITDA percentage by a similar kind of percentage. What is the EBITDA margin we are expecting on a steady-state basis? That is one. Second is on the India dip, which we saw, and you explained that this is because of some investments you have made. When are we actually expecting the results to come out of those investments?
Eashwar Iyer: First question is first in terms of the overall EBITDA margin. Is that the question? I hope I got it right.
[Analyst] (AVUS Capital): That is right.
Eashwar Iyer: The business delivered 60.1% EBITDA margin for the financial year 2025/2026. Q1, we delivered 60.4%, and in this quarter, we have delivered 61.4%. This business, as we have articulated in the past, has operating leverages, which translates to an EBITDA growth which normally is faster than the revenue growth. We expect that trend to continue.
[Analyst] (AVUS Capital): Okay. On the India EBITDA-
Operator: Sorry to interrupt. Due to time constraints, kindly come back in the question queue for more follow-up questions. The next question is from the line of Renga Varshini K from Wealthify. Please go ahead.
Renga Varshini K: Good evening, sir. Congratulations on the good set of numbers. My question is on the margin side. How does it differ between your India and international business, and how much of this is organic versus the acquisition part of it? If you could quantify this on a percentage basis, that will be helpful, sir.
Eashwar Iyer: See, we look at our business as a combination of two factors. One is that the manufacturing base is here in India. Therefore, we see a huge leverage that happens for the India operations. But the largest retail chains are in the West. That is the reason in the past, and as we also evolve as an organization, we are talking about the strength of an IGI, which is the manufacturing strength coupled with the retail strength of the other geographies, giving us the edge as far as the totality of the business is concerned. That is the reason why we have always articulated, please do not look at these numbers in isolation because the demand comes in from the Western market. We are the suppliers to the world. The entire ecosystem, as far as lab-grown business is concerned, rests in India.
Eashwar Iyer: The entire grading process also rests in India. That is the reason I would endeavor to ask everyone to look at these numbers in its totality.
Renga Varshini K: Understood, sir. Thank you very much. If I may add up another question. We have discussed in the previous quarter about expansion of AGL beyond the US. In which geographies are we particularly targeting, sir?
Eashwar Iyer: Tehmasp, would you want to answer that question?
Tehmasp Printer: Yeah, no sweat. See, AGL has excellent expertise in the colored stone analysis, and IGI has a global reach. What we plan to do is to extend AGL services to the other parts of the globe. We are already looking into different territories where we are expanding. But currently, I would not really like to expose where exactly we are going to open up. But we have a plan which will take AGL to the global levels.
Renga Varshini K: Thank you, sir. All the very best.
Tehmasp Printer: Yeah. Thank you.
Operator: As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Eashwar Iyer: Tehmasp, would you want to give some closing comments, or you want me to take it?
Tehmasp Printer: Just take it.
Eashwar Iyer: Okay. Thanks, everyone. Thanks for taking the time, and we hope that we have answered the questions that is running around in your mind. In case you have any further follow-up questions, we are just one phone call away. We appreciate your patience, and thank you very much for the time.
Operator: Thank you. On behalf of International Gemmological Institute (India) Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
