Bharat Takes Off

Bharat is Sanskrit for India, literally meaning 'to be maintained' according to Wikipedia. I was thinking about that during the opening of the Bharat Diamond Bourse (BDB) this week at Mumbai’s Bandra Kurla Complex. After years of construction, the facility was officially inaugurated with a number of large firms, including Dimexon and Rosy Blue, announcing that they are moving in.

It’s worth considering the dry figures. The new facility has nearly two million square feet of office space, more than twice as much than the Israeli Diamond Exchange, and has another 1 million square foot basement.

The BDB houses 2,500 offices in eight nine-floor towers. This is a completely enclosed facility, a walled city, that will be offering everything from safes through customs to office supplies. If it runs out of space, it has a permit to add a 20-floor tower on the bourse grounds.

De Beers has a small office across the street and Gitanjali has already been out at the Bandra Kurla Complex (BKC) for some time. BKC is a commercial complex in the suburbs of Mumbai, south of Santacruz and near the airport that is attracting businesses, banks, hospitals and schools from congested areas in the city. The new American consulate is currently under construction in the BKC.

The bourse opening took place just days after the Indian industry held the third Mines to Market conference and like the opening of the Bharat bourse, with ministers and parliament members in attendance, the conference was a show of force too. One issue that emerged is that India succeeded in securing direct rough supplies. Alrosa sales mostly to Indian firms, Zimbabwe sent its Mines Minster with a large delegation to solidify ties with India’s industry, while Rio Tinto and De Beers have been long been supplying this market in large quantities.

The focus is on rough prices and profitability, but in many ways, the shift to supplying India’s diamond jewelry retailers is where the marketing efforts are placed. This focus is Gareth Penny’s dream of vertical integration come true. An efficient and consolidated system (almost) from mine to retailer. With Rio Tinto’s Indian diamond mine about to go online, the almost will soon be gone.

According to Indian Commerce Minister Anand Sharma, large suppliers such as Alrosa, Rio Tinto and Endiama have been granted exemptions from import bank guarantee requirements. An issue between the government and De Beers over their joint Hindustan Diamond Company, he promised, will soon be resolved. The undisclosed issue between the sides has blocked De Beers’ supply to India’s secondary market (the company is a branch of Diamdel).

Another issue that requires resolution at the government level is the turnover tax. The point of contention is the industry's profitability. The industry claims a net profit of 3 percent while the government argues that it is at least 6 percent. As it looks now, the gap won’t be bridged soon and turnover tax won’t go into effect in the foreseeable future.

It’s easy to look at the Indian industry and try to compare it to other centers. Instead, let’s look at it for what it is in its own right - a strong and sophisticated center led by shrewd businessmen not afraid to take big risks. Backed by local banks and a generally supportive government, the industry is set to continue its growth.

If you are wondering about the future, look at India. The Bharat bourse, Mines to Market and BKC are just the tip of the iceberg. With its easy-going attitude and warm hospitality, India is confidently moving forward, leading the way by example. Expect that to be maintained.