After the Introductory and Inaugural Sessions held in the first part of the day, the seminar on Diamond Financing 2017: New Opportunities New Realities conducted  two  major business sessions. The first, titled “Emerging Opportunities in Diamond Finance” was chaired by industry veteran Varda Shine, former CEO of De Beers’ Diamond Trading Company.  Currently CEO of her own company, Sky Ink, Shine  is an industry consultant involved in  wideranging activities.

Shine set the context for the session, with a brief, yet penetrating overview of the financing scenario past, present and future.  She traced the changes taking place on the financial front  from stock based funding of the 20th century; through the period when the retail industry had moved from stocking to memo and even  just in time purchases; to the time when De Beers’ supply-led model was transformed to a demand-led one. She noted that evolving bank regulations and new requirements had imposed restrictions on the  banking industry.

Shine outlined three reasons why banks “have lost their appetite” for financing the diamond industry as: low transparency within the  industry; lack of real solid collateral; and the fact that banks see this as a no-growth industry.

However, Shine noted, good businesses do have access to finance and there is a greater “selectivity” displayed by lenders.  Though bank financing accounts for the major  chunk and is the  most important source of financing for the industry, Shine said there were a number of other options out there which other speakers would be expounding upon.

In conclusion, she said that each and every company needs to be transparent, compliant,  and able to talk the same language as the financial institutions in order to benefit from the financing opportunities available. 

Eik Jens, CEO, Diamond and Jewellery Clients of ABN Amro, perhaps  the longest serving banker to the diamond business, said that it was past mistakes which had resulted in the  present bubble. He repeatedly stressed  that it was only a perception –   an incorrect one – that finance is a problem. He said there was plenty of finance for bankable companies.  He also pointed out that was not turnover but profitability which was counted as most important.

Saying that blockchain technology is one surefire way of keeping tabs of the origin and journey of a diamond Jens presented a detailed graphic on how it works demonstrating why it is superior to most other methods of tracking diamonds. 

Walter Gontarek, CEO and Partner of  Channel Capital Advisors LLP,  said that since the global financial crisis,   several industries were  confronted with a situation of inadequate financing.     He noted that  there was a US$ 1,6 trillion gap in trade financing, a gap, moreover, which was only increasing.  This is where organisations like his had stepped in, by  judiciously financing different sectors. However, given their nature – institutional funds – they were bound to be extremely careful and diligent when advancing credit.  They looked at  stability of the  company and its business model. They required the entity to be transparent, having a corporate structure supported by professionals; and timely and robust financial reporting.

George Abraham, Specialised Industries Group, Wholesale Banking, Emirates NBD, spoke  about the Growth  of Diamond Financing in Dubai and the Potential for Islamic Finance.  He said that the Government of Dubai was very keen on increasing the trade in the Emirate and had therefore set up the DMCC. Abraham spelt out the reasons why  Dubai was an ideal trading  centre   as well as an important diamond financing centre for the diamond industry. The bank has also started an office in India, he announced.

Paul Boots of Osprey Advisory, till recently COO of Beehive Group, UAE’s first online peer-to-peer financing platform, introduced the participants of the seminar to the concept of Crowdfunding, what it means and how to go about raising such finance. Crowdfunding at  its most basic is in the form of donations given to an organisation or activity. In the form of Rewards and Equity it can be a Kick Starter for an enterprise. He also spoke about peer-to-peer financing.

The panel discussion that followed had Rajiv Mehta of Dimexon join the speakers and was moderated by session chairperson Varda Shine. There was some discussion on what exactly was meant by corporatisation and professionalism. There was a consensus that listing a company was not enough to be counted as a “corporate”. Rather the terms encapsulated a set of beliefs and practices which could be found equally in smaller companies and bigger. While there was a view from some that a private limited company or limited company  was preferable, it was clear that the company must be transparent, have the proper systems and checks in place.   Mehta outlined the journey of Dimexon over three years when his  family had made far reaching changes in its systems and functioning to put it on a strong professional and corporatized footing.

The next session – Financing Diamond  Companies in India – turned the   spotlight on the domestic situation.

Anup Zaveri, Member BDB Executive Committee presented  the Opening Remarks.  He spoke of a changing, growing India and the new initiatives of the Hon’ble Prime Minister of India to usher in   cashless and digitalised systems in businesses. He said the diamond industry was dedicated to taking this vision forward and bodies like BDB and GJEPC were committed to ensuring that it was implemented by the entire industry. A large section of the industry was functioning on the foundations of transparency, complying with all norms and regulations already he said.

Formerly with  ABN Amro,  Biju Patnaik, EVP, IndusInd Bank, is  a veteran banker catering to the diamond industry in India, with a certain depth and breadth of understanding of the industry. Though he said  bankability is an issue, Patnaik  went on to express his faith and confidence in the diamond industry as a whole. He said there were shortcomings on both sides – bankers did not conduct their due diligence in a thorough manner while certain players within the industry did not conduct themselves with the required fiscal probity.  He outlined various steps for each side in order that a better equation and a win-win situation could be worked out.

Anjan Ghosh EVP and Chief Rating Officer with ICRA Limited speaking  on  sector specific credit rating model for the diamond industry, took the audience through the various credit-related  issues with regards to the industry. However, he showed though graphs that if within ICRA’s general universe, about 74% of the companies evaluated fell in the uncreditworthy segment and only 26% made  to creditworthy segment; in the diamond industry the figures were 45% and 55% respectively.

T. Ravindranath, Field General Manager, of Syndicate Bank, Mumbai   saying that pre-shipment credit will always be the focus of lending, went on to expound on some of the problems being faced by bankers. The greatest challenge lay in assessing the value of the goods. He said, sometimes  it was also difficult to pinpoint  which remittance was in lieu of which goods; and the lack of clarity on this, could mean that  companies  managed to stretch the  period when receivables  were due.  Ravindranath also noted that there was an elongated working capital cycle, which, he felt, was a real challenge.

Rajneesh Sharma, General Manager (Corporate & Institutional Credit), Bank of Baroda,  said it was important for a lender to understand and evaluate the business model of the client and to match it with his own  parameters. He said that he had a passion for supporting the growth of MSMEs and pointed out that 90% of the NPAs related to large companies and only 10% were of those in the   MSME sector. Sharma told the  gathering that his bank had devised a new offering for clients which was currently in a pilot stage and would be  announced soon. He said that banks should have a monitoring mechanism in all products they offered customers, which was the  only way of safeguarding  itself.

The presentations were followed by a panel discussion with Pranay Narvekar moderating, which delved further in various issues and solutions to the issue of financing for the diamond industry.