How to Derive Right Value

for Diamonds

Anil D. Shah
Partner
Venus Jewel

1
Current Scenario

“ You can avoid reality,

but you cannot avoid the
consequences of avoiding
reality”
Ayn Rand (1905-1982)

2
 Definition of Value Addition

Value Addition - “Is the amount of value added to a

product's in final or semi-processed form over and
above the value in its raw form”

Rough Diamond Polished Diamond Finished Product

Value Addition Value Addition

3
 Types Of Value Addition
Value addition
• By manufacturer from root level
• By Getting Right Kind of Rough
• Doing Research Base Production
• Based on Demand and Supply
• Based on Product
• By Creating Faith in Grading
• By Research based pricing
• Based on Quality Control
• Based on Marketing
• Based on Services
• By Inventory Management
4
• Based on moral value
 Value Addition By Manufacturer
From The Root Level

 First step towards value addition

E.g. procuring right kind of rough, right kind of Research, using right
kind of technology, doing the accurate grading , pricing etc…
 Above factors contributes towards the Value addition of your
diamonds

5
 Value Addition by Getting
Right Kind Of Rough

 “Kimberly Process” is very important

 Surety of continuous supply of right
kind of rough from the miners
 Integrity has to be maintained right
from acquiring the rough up till the
final product
 Extensive research for getting the
optimum output from the rough is
necessary

6
 Value Addition Doing Research
Based Production

 Research is a continuous and a

never ending process
 Proper research has to be carried
out in order to be up-to-date with
the demand and the supply trends
within the market
 A research department needs to be
highly experience
 Right kind of research will always
be helpful to give what the market
wants i.e. what you want
7
 Value Addition Based on
Demand and Supply
 Changes in demand-
supply trends are factored One gets Feedback
exactly and market
into the manufacturing what one is trend
system, swiftly changing looking for analysis
the product mix
 Leads to a win-win
situation for both,
customers as well as us
Product mix Changes
 One gets exactly what automatically factored in
one is actually looking for changes to to the mfg.
current system
without having to worry demand
about overstocking
inventories 8
 Value Addition
Based on Products

 Best cut, polish & symmetry are the important factors

 Also need to balance its value of the stone in relation to cut& shape
E.g. we need to check whether we can derive a better value by
manufacturing round shape, princess shape, square emerald etc…

 Provide correct database to artisans for taking on floor decision

 Value Addition based on Creating
Faith in Grading

There are many Problems with in the market such as:-

 Lack of accurate, transparent, consistent grading in
market
 Grading done based upon traditional 4C’s and other
standard parameters

 Limitation for the buyers to review the diamonds in depth

before buying

 Today's markets require much more than the standard

grading parameters

10
 “IDEAL Grading System”

Ideal Grading System should be:-

 Consistent and detailed

 Easy and hassle free for selection of goods

 Eliminating requirement for

• Physical examination of goods

• Re-Grading

 Such that Price difference with similar

grades can be easily justified

 Such that all the details of the diamond are
available in one place
 A Multi Tier Checking system, ensuring
that each diamond is checked by different
graders before it is being finally graded 11
12
Sr. No. Grades Venus Grading System Others
1 Cut 6 6
2 Internal Graining 4 0
2 Polish 5 5
4 Symmetry 5 5
5 Culet 6 8
6 Color (including fancy colors) 54 27
7 Color hue 17 0
8 Fluorescence 10 5
9 Fluorescence Color 5 6
10 Clarity 32 12
11 Luster 11 0
12 Table Inclusions 5 0
13 Black Inclusions 5 0
14 Inclusion Pattern 5 0
15 Open Inclusions 6 0
13
“Too many people today know
the price of everything and
the value of nothing.”
-Ann Landers (1918-2002)

14
 Value Addition by
Research based pricing

 Various pricelist are available in market

 Pricing should not be
• Market influenced one
• Influenced by the cost factor
 Pricing should be influence by the
Demand and supply
 Pricing difference between 2 similar
grade stones should be easily justified

15
 RO +3.00 Ct: Price effect with color & clarity
Price per Carat in INR
Difference in Price of Overall Price Difference in
Clarity same Clarity & Color 3.00 Cts for same Clarity &
G+ G G- Group Per Ct in Rs. Color Group in Rs.

VVS1 1497786 1401864 1335135 162651 487953

VVS2 1354207 1288088 1212643 141564 424692
VS1+ 1149991 1105287 1049477
121508 364524
VS1 1126749 1083169 1028483
VS2+ 956928 920190 873658
VS2 937809 901961 856226 117806 353418
VS2- 916956 884295 839122
SI1+ 685656 668411 640482
SI1 657821 641467 614616 87441 262322
SI1- 638983 623332 598215 16
 Logical & Rational Pricing
 Extensively detailed grading combined with continual research on market
trends allowing rational and logical price derivation of each diamond
 Trillions of possible pricing combinations for every shape and size
 Price difference between stones is rationally justifiable and easy to understand
 Pricing based on parameters rather than based on rough purchase prices
 Pricing are set only based on study and not taking any other price list as a base
 All the business should be transacted on fixed and final pricing terms

Pricing Factors
 Polish  Black Inclusion
 Symmetry  Location of Inclusion
 Fluorescence  Inclusion Pattern
 Luster  Pointer (weight)
 Opens  No. of Days in Stock
 No. of Hits
 Internal Graining
 Rough Material Type
 Color Hue (Shade)
17
 Cut
% Difference
Polish Price Per Price Per
Shape Size Clarity Color Cut from first
Symmetry ct in INR ct in US$
Grade
ID 765846 16260
EX 762078 16180 -0.49
Round 2.01 VVS1 G EX VG 709326 15060 -7.38
GD 637499 13535 -16.76
FR 558371 11855 -27.09

ID Ideal Cut
EX Excellent Cut
VG Very Good Cut
GD Good Cut
FR Fair Cut
18
 Table Inclusion
Cut % Difference
Table Price Per Price Per
Shape Size Clarity Color Polish from first
Inclusion ct in INR ct in US $
Symmetry Grade
T0 604764 12840
T1 598877 12715 -0.97
Round 2.01 VS1 G EX T2 589928 12525 -2.45
T3 583805 12395 -3.47
T4 580979 12335 -3.93

T0 Clean Inclusion
T1 Minor Inclusion
T2 Medium Inclusion
T3 Major Inclusion
T4 Mostly Inclusion 19
 Black Inclusion

% Difference
Cut Polish Black Price Per Price Per
Shape Size Clarity Color from first
Symmetry Inclusion ct in INR ct in US $
Grade
N0 762078 16180
N1 750774 15940 -1.48
Round 2.01 VVS1 G EX N2 746771 15855 -2.01
N3 739235 15695 -3.00
N4 723927 15370 -5.01

N0 None Inclusion
N1 Minor Inclusion
N2 Medium Inclusion
N3 Major Inclusion
N4 Mostly Inclusion 20
 Fluorescence
% Difference
Cut Polish Price Per Price Per
Shape Size Clarity Color Fluorescence from first
Symmetry ct in INR ct in US $
Grade
FL0 762078 16180
FL1 739235 15695 -3.00
Round 2.01 VVS1 G EX FL2 645741 13710 -15.27
FL3 585689 12435 -23.15
FL4 570617 12115 -25.12

FL0 No Fluorescence
FL1 Faint Fluorescence
FL2 Medium Fluorescence
FL3 Strong Fluorescence
FL4 Very Strong Fluorescence
21
 Inclusion Pattern

% Difference
Cut Polish Inclusion Price Per Price Per
Shape Size Clarity Color from first
Symmetry Pattern ct in INR ct in US $
Grade
S1 462287 9815
S2 459932 9765 -0.51
Round 2.01 SI1 G EX
C1 457577 9715 -1.02
C2 453102 9620 -1.99

S1 Scattered inclusion
S2 Semi Scattered Inclusion
C1 Light Concentrated Inclusion
C2 Semi Concentrated Inclusion

22
 Internal Graining

% Difference
Cut Polish Internal Price Per Price Per
Shape Size Clarity Color from first
Symmetry Graining ct in INR ct in US $
Grade
G0 457577 9715
G1 455222 9665 -0.51
Round 2.01 SI1 G EX
G2 453102 9620 -0.98
G3 448392 9520 -2.01

G0 No Internal Graining
G1 Light Internal Graining
G2 Medium Internal Graining
G3 Heavy Internal Graining

23
 1 ct Round IF D Price Trend
INR 1,100,000

INR 1,000,000 964395

959535

902835
INR 900,000 926280

852975 834300
858465 849465
797715
INR 800,000 766710
778185
765855
744120 729180 704925 770445
691245
INR 700,000 684450
676170 645300
697590
677475 701280
667440 620460 657720
636435
INR 600,000 632475
605025

INR 500,000

INR 400,000

INR 300,000

INR 200,000

INR 100,000
Nov-08
Dec-08

Nov-09
Dec-09
Oct-08

Oct-09
Apr-08

Apr-09

Apr-10
Jan-08

Jun-08
Jul-08

Jan-09

Jun-09
Jul-09

Jan-10
May-08

May-09

May-10
Aug-08
Sep-08

Aug-09
Sep-09
Mar-08

Mar-09

Mar-10
Feb-08

Feb-09

Feb-10
24
 1 ct Round VVS2 F Price Trend
INR 500,000
463635

454365
INR 450,000
425565
425520
410175 418275
406665
INR 400,000
384435 379935
374355
368010 370620
368730
360765
INR 350,000 332280
361440
332325 340560
333180 317790 338895
325800 324090
308925 296505 314640
INR 300,000
290610
286470 282150

INR 250,000

INR 200,000

INR 150,000

INR 100,000
May-08

May-09

May-10
Oct-08
Feb-08

Feb-09

Oct-09

Feb-10
Apr-08

Apr-09

Apr-10
Jul-08

Jul-09
Nov-08
Dec-08

Nov-09
Dec-09
Aug-08
Sep-08

Aug-09
Sep-09
Jan-08

Mar-08

Jun-08

Jan-09

Mar-09

Jun-09

Jan-10

Mar-10
25
 Effects of different Grading Parameters
on Price in same Shape, size, Color & Clarity Group
Top/ Cop %
Shape Carats Color Clarity Cut PO / Sym CI. Natts Flou
/Pop Difference
RO 1.01 G VVS2 ID EX NN T0 N0 FL0
RO 1.00 G VVS2 VG EX VS T4 N4 FL0 -25.2

Top/ Cop %
Shape Size Color Clarity Ct / Po/ sym CI. Natts IP.
/Pop Difference
RO 2.01 F VS2+ EX NN T0 N0 NN
RO 2.00 F VS2- EX MD T4 N3 C2 -33.1

Top/ Cop %
Shape Carats Color Clarity Cut Po / Sym NT CI. IP. Flou
/Pop Difference

RO 3.01 G+ SI1+ ID EX N0 NN T0 NN FL0

RO 3.00 G- SI1- ID EX N4 SM T3 C2 FL0 -36.2

26
 Price Comparison of Fancy shapes
with Round Brilliants (in INR)
Carats Clarity Color Ct/Po/Sy Shade Luster Black inclusion Fluorescence
2.010 VVS1 F Excellent White Very Good N0 FL0

Price per cts. % Difference

Shapes
In INR From Round
ROUND 823981
HEART 489379 -40.6
PEAR 488378 -40.7
MARQUISE 485122 -41.1
OVAL 466588 -43.4
PRINCESS 437536 -46.9
CUSHION BRILLIANT 424262 -48.5
RADIANT 411489 -50.1
CUSHION 396212 -51.9
EMERALD 382437 -53.6
SQUARE RADIANT 377929 -54.1
SQUARE EMERALD 368162 -55.3
TRILLIANT 342616 -58.4
TRIANGLE STEP 279001 -66.1
27
BAGUETTE 277499 -66.3
 Difference between the Pricing
Logical & Rational Price Lists. Market Price Lists
Publically available to their
Availability Available for customers in terms of actual stones
subscribers
Around 16 grading attributes and price differs on each
Depth Limited to 4 C
grade, example 1.00 & 1.01 also has different price
Changes/
Frequently on daily basis as per market / sales Less frequently
Updation
Around trillions of combination of prices based on
Dynamism grading combinations Main 16 grades creates numbers Limited combination.
of combination
Very less difference in each price points are varying on
High price point and gaps
the grades for example in Round shape +1.00 there is
Precision as the prices are based on
difference in SI1 purity as under SI1+ TO SI1 DIFF IS
basic clarity/color grades
5.50% AND SI1 TO SI1- DIFF IS 4.50% in D+ F- color.
Key Factors
Prediction / transactions/
dominating Actual Sales / demand / supply
generalized feedback 28
price
 Value Addition Based
on Quality Control
 Quality Control process affects the overall
quality of the product
 Quality control via Inspection at every stage
of production essential
 Skilled
• Artisans

• Graders
• Sales people
 Organization culture, confidence, motivating
workforce, team spirit, relationship also
matters
 We add Value by effective Quality Control in
our organization
29
 Value Addition Based
on Marketing

 Marketing has always been an effective tool when it comes

to promoting and branding the products
 Manufacturer provide marketing support to the retailers
with the help of additional support apart from selling the
product
E.g. Effective distribution supply chain
 Which retailers provide marketing support to their
customers
E.g. Advertising, promotion etc….

30
 An Effective Supply Chain

But the customer

A customer comes You show him the The customer want customize
to your store available Products selects a Ring the Ring

You start preparing The customer You log on to

the mount selects the good as company website
per his specification

In mean time You prepare the ring

Goods are and deliver it to the Thus the customer
delivered to you customer on time is happy

31
 Value Addition based
on Services
 Services are the most important and a prominent part of
any business
 Service has to be provided at the right place, at right
time, to right people, and at right cost

 That could be any regular service or the Add-on-Service

that the company is providing

E.g. Diamond DNA, Unique Grading & Pricing System,

real time inventory, easy payment options, ready to
deliver goods, faster delivery of goods, etc….

32
Diamond DNA

33
 Value addition by
Inventory Management
 Predict requirements and according
stock your goods
 No need to keep huge inventory
 Order at your convenience
 Concentrate on the type and quality
rather than the cost of overstocking the
goods
 Get Just-In-Time delivery of good for
production
 Choose your supplier appropriately
 Reduce the cost of inventory and in turn
reduce the overall cost of your final
product and maximize profits 34
 Value Addition based on
moral value

 India is now operating on an

international platform
 Providing Faith to customers through
Quality, Transparency, Trust,
Satisfaction the 4 main Pillar of any
organization is essential
 Importance for moral value, best
business practices, fair competition,
equal opportunity has been
increasing
 With all these practices we add value
to the product 35
“It Is Not What We
Receive Enriches Our Lives,
but It Is What We Give”
- George Albert Smith (1870-1951 )

36
37