The imposition of 50% tariffs (25% reciprocal plus 25% penalty) by the U.S. on gem and jewellery is expected to lead to a revenue fall of India’s natural diamond polishing industry by a steep 28-30% to $12.50 billion this fiscal, compared with $16 billion last fiscal, CRISIL Ratings said in a note. 

The blow will follow a 40% degrowth over the past three fiscals because of a fall in both prices and sales volume of natural diamonds as demand in the U.S. and China dropped, and competition from lab-grown diamonds rose, it said.

The 50% tariffs, effective this week, makes exports to the U.S. tough for two reasons: one, the industry’s low margins make absorption of the incremental levy very difficult and two, declining demand means passing on the incremental burden to consumers will not be easy, it said.

The consequent reduced operating leverage could erode the operating margin of diamond polishers by 50-100 basis points and pressurise their credit profiles, it added.

“Our analysis of 43 diamond polishers, accounting for nearly a fourth of the industry’s revenues, indicates as much,” the rating agency said.

The Indian polished diamond industry derives 80% of its revenues from exports while the U.S. is a key market for India and accounted for as much as 35% of its exports. 

Sales had begun getting impacted after a 10% tariff was imposed in April 2025. Hence, the share of the US in India’s polished natural diamonds slid 1100 basis points in the first four months of this fiscal to 24%, CRISIL said.

But in a proactive move, diamond polishers had cranked up production in July and August to meet the anticipated festival demand in the US. 

“Not surprisingly, exports surged 18% in July on-year. And competition from lab-grown diamonds in markets such as the US will continue to dent revenues, with the variety having already captured ~60% of the market share by volume. Subdued Chinese demand adds to these woes,” the rating agency said.

Rahul Guha, Senior Director, CRISIL Ratings, said, “The upshot is that revenues for the domestic industry, which polishes 95% of all diamonds produced in the world, is set to drop to its lowest since 2007.”

“To be sure, consumption in India has been increasing sequentially over the years, but the incremental demand doesn’t have the heft to fully offset the losses in the U.S. and China. Additionally, while the UAE has emerged as a dominant hub for India’s exports with its share doubling to ~20%, on year, the risks of a substantial downturn in revenues are high,” he said.

The industry’s ability to navigate the market dynamics, including tariffs, is crucial to its future. Diamond polishers can take three steps: increase domestic sales; push sales in alternative geographies; and set up polishing facilities in trading hubs as rerouting via low-tariff nations is not an option, he said. 

Even if retailers explore alternative sourcing options in lower-tariff countries such as the UAE or Belgium, a significant portion of the diamonds would still be polished in India and thus subject to higher tariff, he added.

And given the falling demand, US retailers are unlikely to absorb the tariff cost. Hence, operating margins of diamond polishers would decline to 3.5-4.0% after dropping 100 bps in the past three fiscals from a peak of 5.5% in fiscal 2023.

Diamond polishers are expected to keep a lean inventory to control debt. Miners have cut production to limit the fall in prices, in line with subdued demand. Timely collection from customers abroad will be monitorable amid slowing demand. Debt levels of diamond polishers should reduce over the medium term.

Himank Sharma, Director, CRISIL Ratings said, “While limited reliance on external debt has helped diamond polishers maintain a stable capital structure, declining scale of operations and pressure on profitability will likely test their credit risk profiles. Specifically, while the financial leverage1 is expected to be relatively stable at 0.7-0.8 time, the interest coverage could decline to 2 times from 2.3-2.5 times last fiscal.”

In the road ahead, demand for natural diamonds in key markets will need close monitoring, given the tariff landscape and geopolitical uncertainties, CRISIL said. 

Published – August 28, 2025 03:40 pm IST

The FMCG sector is expected to see a moderate revenue growth this fiscal, a new report said. File
| Photo Credit: MOHD ARIF

The fast-moving consumer goods (FMCG) sector is expected to see revenue growth of 7-9% this fiscal, according to a report released by CRISIL Ratings on July 6.

The expected revenue increase in FY 2024-25 will be supported by higher volume growth due to a revival in rural demand and a steady demand from urban areas. The estimated growth of the FMCG sector in 2023-24 was 5-7%.

The report said product realisation is expected to grow in single digits with a marginal rise in prices of key raw materials for the food and beverage (F&B) segment. However, the prices of key raw materials for the personal care and home care segments are likely to be stable.

CRISIL Ratings Director Rabindra Verma said, “Revenue growth will vary across product segments and firms. The F&B segment is expected to grow 8-9% this fiscal, aided by improving rural demand. The personal care segment is likely to grow by 6-7%, and the home care by 8-9%.”

The FMCG players will continue to eye inorganic opportunities, which will help them expand product offerings, the report said. Sustained improvement in the rural economy, which depends on the monsoons and farm incomes, will be essential for generating steady demand, it added.

Adani Power Limited’s bank loan facilities were rated ‘A’ with a stable outlook earlier.
| Photo Credit: Photo Credit: X/@CRISILLimited

Crisil Ratings has upgraded its ratings on Adani Power Limited’s (APL) ₹38,000 crore of bank loan facilities to ‘AA-‘, saying the business and financial risk profile of the company has seen “strong improvement”. The loan facilities were rated ‘A’ with a stable outlook earlier.

“The rating upgrade follows the strong improvement in the business and financial risk profiles of APL,” Crisil Ratings said in a report.

“The upgrade is driven by better-than-expected operating performance backed by timely commissioning and ramp-up of the Godda power plant (1.6 GW), Mahan power plant (1.2 GW), full recovery of pending regulatory dues related to claims for fuel costs as pass-through under change in law clauses of existing power purchase agreements (PPAs) and continued improvement in receivables,” it said.

“The rating also factors in the completion of most of the regulatory investigations into Adani Group. Regulatory investigations in two remaining allegations are under way and are expected to be completed over the next three months,” the ratings agency said.

It further said that APL has recovered a majority of pending regulatory dues, including carrying costs and late payment surcharge (LPS) between April and October 2023 from counterparties, post-resolution of the matter in APL’s favour through the order of Supreme Court of India in March and April 2023.

“The company has been receiving monthly receivables on a timely basis, including recurring regulatory claims, supporting its operating cash flow. The operating performance of APL has been strong with robust plant load factor (PLF) and healthy operating margin,” it said.

The company had better-than-expected operating earnings before interest, taxes, depreciation and amortisation (EBITDA) of ₹10,041 crore for fiscal 2023 and ₹7,926 crore for the first half of fiscal 2024 (₹10,280 crore in fiscal 2022).