Why Indian Startups & Legacy Brands Are Rushing Into Lab-Grown Diamonds

Tiffany & Co. and De Beers — you may know the names of these Western companies due to their undisputed hold on the global diamond industry for centuries.

However, what may startle you is India’s deep-rooted tryst with diamonds that dates back to the 5th century BC. You may as well find their mention in ancient Sanskrit texts and manuscripts written between 320 and 296 BC.

The nation was the primary source of diamonds for the world until the late 1720s when Brazil discovered the vanity rock on its turf. Despite the rise of new diamond-producing nations, India’s role in diamond export has always been extraordinary. Notably, we have given this world some of the rarest diamonds on Earth — the Pink Agra Diamond, The Kohinoor, and The Orlov, just to count a few.

Unfortunately, despite our diamond-studded history, India today is not a major producer of diamonds. It is, however, the world’s largest exporter of processed (cut and polished) diamonds.

Luckily, this equation has started to change, and diamantaires are now calling India a rare bright spot even amid ongoing global economic uncertainty.

The change of fate can be attributed to a paradigm shift in how the country’s diamantaires are sourcing diamonds. Notably, some of the hottest diamonds on the market aren’t being excavated or mined but grown in labs.

Once met with scepticism, lab-grown diamonds are now widely accepted, as doubts about their authenticity have lost any sheen they gathered in the past.

This is because, for the average consumer, there is little distinction between the two, as they are identical in appearance, composition, and structure. Diamonds, whether natural or lab-grown, share the same chemical composition and physical properties. However, their key differences lie in their formation process, rarity, and environmental impact.

Natural diamonds are formed deep within the Earth’s mantle over billions of years under extreme heat and pressure. Volcanic eruptions bring these diamonds closer to the surface, where they are mined.

On the other hand, lab-grown diamonds are created in controlled environments using advanced technological processes. The two primary methods for their production are Chemical Vapor Deposition (CVD) and High-Pressure High-Temperature (HPHT). Both processes replicate the natural diamond formation by using pure carbon, high pressure, and extreme heat to develop the crystalline structure.

While both types of diamonds appear identical, natural diamonds tend to retain higher resale value, whereas lab-grown diamonds are more affordable and considered a sustainable alternative.

Now, who wouldn’t want a bigger, more affordable diamond? That’s exactly what some of India’s emerging and legacy jewellery brands have on offer.

A case in point is Trent, an Indian retail company part of Tata Group, whose new subsidiary, Pome, is entering the growing lab-grown diamond market. The craze is such that the likes of Senco Gold, too, have expanded into this space with its newly incorporated wholly owned subsidiary, Sennes Fashion Limited.

Meanwhile, D2C jewellery brand Giva has hinted at the plan to strengthen its lab-grown offerings. Besides, an array of promising startups are mushrooming in the segment by raising funds to cash in on the fervour for lab-grown diamonds. True Diamond, Solitario Lab Grown, and Aukera are some names that are part of this brigade.

What’s Driving The Surge?

Now, the first obvious question that arises is: What is driving this rapid growth? A simple answer, of course, is affordability. According to industry experts, lab-grown diamonds are significantly cheaper than natural diamonds, and the price difference becomes even more pronounced as the size increases.

Very small lab-grown diamonds can be around 60% less expensive than the original ones. A one-carat solitaire can be 90% cheaper compared to its natural counterpart. For larger solitaires, such as three- or five-carat stones, the price can drop by as much as 95%.

While price often dominates the conversation, Lisa Mukhedkar, founder of Aukera, maintains that the main driving force behind the popularity of lab-grown diamonds is the combination of quality and designs.

As per Mukhedkar, mined diamonds today have suffered in quality. “Many natural diamonds now have lower clarity, often graded as SI (Slightly Included), meaning they contain visible inclusions. Their colour has also declined, with many falling into the J and K range, or even as low as I1 and I2. In my opinion, these aren’t true diamonds; their yellowish hue significantly reduces their value,” she said.

In simple terms, natural diamonds are usually graded based on two main qualities: clarity (how clear the diamond is) and colour. Diamonds with high clarity are rare and have fewer tiny imperfections or “inclusions,” while diamonds with a good colour appear colourless or nearly colourless.

When diamonds fall into grades like SI or even lower grades like I1 and I2, they contain more imperfections. Diamonds with a colour rating of J, K, or lower (like I1 and I2) often have a yellowish tint that reduces their appearance and value.

Mukhedkar attributes this decline in quality to brands trying to keep their prices competitive, which has today resulted in smaller, lower-quality diamonds being sold to consumers. He underlined that consumers were frustrated with this trend as they were not seeing the sparkle for their spend.

Feedback from customers buying diamond jewellery, particularly in early 2023, showed a common regret — they wished for better quality diamonds or a larger stone, hinting at a clear market gap.

Moving on, Gen Z and millennials today prefer to own larger, more noticeable diamonds, according to Ricky Vasandani, CEO of Solitario Diamonds. They don’t want to settle for smaller, less impressive diamonds.

“This shift is in contrast with the days of the past when people would buy rings with tiny diamonds set in thick rhodium polish. These new buyers understand that the true beauty of a diamond lies in the rock itself, something visible to everyone, not just something that requires a microscope to appreciate,” he said.

Moreover, larger solitaires, different cuts, and coloured diamonds were once a luxury few could afford. But, there’s a shift toward appreciating the beauty of larger rocks, Darayus Mehta, cofounder of True Diamond, said.

The creativity behind unique designs, colours, and cuts plays a big role in driving demand, especially when paired with the price advantage that lab-grown diamonds offer.

Lab-Grown Diamonds Pass The Ethical Test

Another key factor driving this shift is the changing ethical perspective of people. People are recognising that no mining takes place with lab-grown diamonds, which means no exploitation of labour or destruction of land.

While this reduces harm, it’s important to note that the manufacturing is not carbon-free. The industry is still using loads of electricity, though it is transitioning to solar power. For now, we are only able to minimise damage, Vasandani said.

“We’re not destroying land or harming lives to obtain these diamonds. We don’t use thousands of gallons of water to get just one carat, like in the mining process. Yes, producing lab-grown diamonds is energy-intensive, and that cannot be ignored,” Mukhedkar said.

However, it is important to be transparent about the environmental footprint. Not everyone is using solar energy yet, but the government is working on building solar farms, and more of the industry will likely transition to solar power as a result.

Competition Heats Up

While consumer demand is growing, many deep-pocketed players are repositioning themselves, and competition in the startup space is also heating up. Therefore, it will not be easy for many to carve out a niche beyond just offering lower prices.

“Right now, people are placing six pieces of jewellery in their living rooms and calling it a brand. Others are putting 15 designs on a website and claiming the same. Selling discounted jewellery and positioning it as ‘cheaper than mined diamonds’ is not branding nor is it a sustainable business model,” the Aukera founder said.

According to her, only the ones building real brands will succeed in the long run in this space. Alongside, fostering strong consumer trust and creating a high-quality retail experience will be key.

Adding to the thought, Mehta of True Diamond said consumers will gravitate toward trusted brands. Today’s discerning customers know that corners are being cut if they are getting something for a steal.

He said that the price of lab-grown diamonds may be significantly lower than that of same-quality natural diamonds, but it does not mean that they are inexpensive. These diamonds can still be pricey.

“The industry has begun to stabilise now. Over the last 18 months, it has been quite dynamic, but in the past three to four months, many brands have started cementing their pricing. The backend supply chain is also becoming more structured and organised. Costs, which were previously fluctuating, are now plateauing, signalling a more stable market,” Mehta said.

Diamantaires’ Race To Radiance

Besides the decline in prices, the domestic lab-grown diamond industry is also grappling with waning consumer interest and rising competition from imports, according to The Global Trade Research Initiative (GTRI).

To address these challenges, the think tank expects the government to take proactive steps, including setting clear and consistent regulations for quality, certification, and market practices; enforcing a Quality Control Order to ensure import standards; and investing in research and development to enhance production efficiency, reduce costs, and improve the quality of lab-grown diamonds.

Indian companies are undoubtedly aiming to compete with global players, but if they continue prioritising speed over quality, they may struggle to keep up. In contrast, brands operating in Spain and the US are focussing on refining their processes, investing time in growing rough diamonds properly, and utilising advanced technology.

In India, the tendency to cut down production time—reducing a 30-day process to just 15 days for mass production—often jeopardises quality.

In terms of regulation, commerce and industry minister Piyush Goyal recently ruled out additional regulations for the lab-grown diamond industry, stating the sector has flourished under the existing self-regulatory framework. While many are fine self-regulating themselves, others want a more defined playing field.

“Self-regulation is valuable, but we welcome well-defined frameworks that ensure fairness and transparency. As long as these frameworks remain neutral and unbiased, they will be beneficial for the industry’s growth and scalability. However, lobbying often plays a role in shaping regulations, which can lead to concerns. If designed fairly, such frameworks can help strengthen the industry rather than hinder it,” True Diamond’s Mehta said.

According to Chahat Shah, the founder of Svaraa Jewels, customers also need to be made aware of the fact that lab-grown diamonds have a 100% buyback value, similar to natural diamonds.

However, currently, there are questions about lab-grown diamonds being an ideal investment choice. This has much to do with who is certifying your diamonds, and customers need to be educated in this area.

Nevertheless, as competition continues to foster innovation and India’s love for diamonds continues to grow deeper, the Indian lab-grown diamond industry is poised for significant growth ahead. But, for now, the race to radiance has just begun.

[Edited by Shishir Parasher]