Sunraj Diamond Exports Ltd Management Discussions

A) Industry Structure and Development:

The industry during the year 2022 – 2023 saw a volatile period. The prices of Raw Materials and Finished products saw a steady decline during the FY. Key markets of the US, Europe and the Far East saw a decline in demand, which was the major cause of the price corrections. Manufacturing activity has been subdued and mass layoffs in the cutting industry hints at difficult periods ahead. We foresee a year of sluggishness with weak to low demand for Diamonds.

B) Opportunities and Threats

The continuing war in Russia has affected a steady flow of Raw Materials to the Industry. Russia being one of the largest suppliers of Raw Materials has seen declining stocks being sold as the increasing sanctions have reduced the volume of raw materials from the mining company. Payments to Russia have been affected due to these sanctions. This has created a scarcity of good quality raw materials and the demand for Russia rough diamonds remains high in the smaller sized goods. Your company continues to maximize this opportunity for selling smaller sizes of rough diamonds.

The small and medium cutters were heavily reliant on the Russian raw materials. Without adequate supply, the revival of the SME sector will continue to be a hugely critical area as they look for alternate sources of raw material. Global markets like the US, China and Europe which were the traditional heavyweights of the industry are facing a severe cost of living crisis with Inflation being a major reason why luxury goods would not be on the priority list of purchases. This would ultimately put downward pressure on the Diamond Industry.

C) Segment-wise Performance

The Company currently has only one business segment viz. trading in cut and polished diamonds and hence product-wise performance is not provided.

D) Outlook

The Indian Diamond Industry is now dealing with the continued existence of Lab Grown CVD Diamonds. Together with this the scarcity of Russian raw materials will also be a very big issue in the coming months. The sudden fall in demand from the US, China and Europe will take its toll on the industry and a period of recession is expected in the current FY. This will continue to be a short-term challenge for the trade. We expect 2023 – 2024 to be a difficult year for the trade, bringing a lower business volume.

E) Risk and Concerns

The Company identifies liquidity issues, sluggish sales due to the weak demand from major markets of the world.

F) Internal Control Systems and their Adequacy

The Company has a satisfactory internal control system, the adequacy of which has been mentioned in the Auditors Report.

G) Human Resources

There has been no material development on the Human Resource / Industrial relations front during the year.