India sees opportunities after opening state-of-the-art bourse

The new diamond exchange replaces the somewhat rundown Opera House premises, but some diamantaires say that space is already at a premium at the Bharat Diamond Bourse in Mumbai’s Bandra-Kurla business district.

After a year in which India’s diamond exports soared back to close to pre-crisis levels, the country’s huge diamond trade received a further boost with the opening of the Bharat Diamond Bourse (BDB) on October 17. After more than a quarter-of-a-century of planning and bureaucratic delays, the new exchange opened in Mumbai’s Bandra-Kurla business district. With the largest diamond exchange in the world in terms of its physical structure, the Indian diamond sector sent a strong message to the rest of the diamond industry that it intends to use the new bourse in its attempts to become not just the largest manufacturing center but as an important trading hub.

But can the new exchange draw in foreign diamond companies that previously were not involved in the Indian diamond business? Will the new one-stop-shop type of exchange with leading security systems and modern facilities bringing together all the elements needed to efficiently transact business persuade non-Indian firms to take space in the exchange?

The planners of the BDB clearly looked at other major diamond centres in putting together the requirements needed for the new exchange. Whereas the veteran Opera House complex in downtown Mumbai had 10-15 buildings and meant visitors, whether buyers or sellers, were forced to continuously move between structures in order to visit clients, the new exchange provides one integrated complex.

Spread over 20 acres with eight interlinked nine-storey towers, it is estimated to have cost $200 million. “We have linked the buildings so that wherever you enter you are inside the bourse and can move between the buildings,” BDB President Anoop Mehta told Antwerp Facets. That is a huge security advantage, especially compared to the situation at Opera House.

“We have also brought all the other important services together under one roof creating a one-stop shop. That is a more efficient way of doing business,” Mehta added.



The security requirements at the new bourse are of a high standard. Visitors to the exchange must show a valid photo ID, and all bags and cases are X-rayed. In addition, approximately 2,500 closed circuit television cameras continuously monitor the complex while face-recognition technology is also in operation. Meanwhile, software that enables office owners to check the cameras outside their offices from anywhere in the world has been deployed.



Mehta said that many hundreds of India’s top diamond firms, accounting for 90 percent of the country’s diamond turnover, had moved into the bourse as of January.


In light of the fact that India's diamond cutting and polishing industry employs around one million people who process more than 80 percent of the world’s diamonds, the new bourse has long been needed to provide a modern image for visitors to the sub-continent’s gems sector. “Up to now workers in Mumbai have been housed in old buildings in southern Mumbai,” said an Antwerp diamond company manager with strong links to India. “Foreign visitors to the Opera House complex were often shocked to see the facilities.”

Mehta said that the BDB would “ultimately help create a Brand India in the world of diamonds. I am not talking about the short-term, but definitely in the longer term this will happen. The new exchange shows how serious we are."

Finding space in the new bourse could be a problem, however, according to Kunal Mehta, head of rough diamond sourcing at Eurostar Diamond Traders in Antwerp. “There is no doubt that it will be much easier to carry out business at the new bourse,” told Antwerp Facets. “You are at the heart of the market in the Bharat bourse compared with the Opera House complex where you had to walk between buildings all the time and wait in long queues in order to get into the various offices.”

“But I am already hearing that space could be a problem in the new bourse. There is always higher demand for space than supply in Mumbai. It’s easier to find space in Antwerp than in Mumbai. We established a new office in Prasad Chambers in Mumbai a few months ago, but it took us quite a long time to find the premises. Office space is an issue because Indian firms deal mostly with smaller goods, which means you need more sorters, and therefore more space to house them,” Mehta added.

Meanwhile, Bank of India branch manager in Antwerp, Arvind Verna, does not believe the new Indian bourse will create a difficult challenge for the Belgian diamond industry. “On the contrary, I believe that by working together the two centres can increase the overall level of business that is being transacted in the diamond business. A lot of polishing takes place in India, and most of the world’s trading is done in Antwerp. Those are facts, and there is no reason why that should change.

“The new Indian exchange, with all services being centralized in one modern set of premises, will make it more likely that foreign companies will open offices in India. India and Belgium can continue to work together very successfully and in that way there will be even more growth. It cannot be in isolation. We are all interconnected,” Verna said.

The exchange was incorporated in 1984 by a group of diamond exporters in the city, but progress was held back by bureaucratic hurdles. With the exchange now open, however, its leaders predict turnover will rise by 10-15 percent annually over the next five years. "We are expecting diamond traders from Israel and Belgium to start trading over here," Mehta said. “The new facilities will help persuade them to move here. Whereas visitors previously had to walk around the public streets of the Opera House exchange, they have complete security here,” he added.

The BDB expects 20,000-30,000 visitors every day. The exchange has parking space for more than 2,200 vehicles, a 1,115 square-metre customs area, another 560-plus square-metre area for clearing agents, banks, restaurants, food courts, landscaped areas and other amenities for staff, visitors, businesspeople and clients.

“Some foreign firms are already in the process of taking space, and I expect that to continue,” Anoop Mehta said. “If you are in the diamond business, especially if you are a large company, then you clearly must have a presence in Mumbai. The city accounts for around 85 percent of India’s total diamond exports.”

Mehta concedes, however, that challenging the other major diamond centres will be no easy task. In addition, it also needs to surpass its domestic rival Surat. Although Mumbai is India’s commercial centre, as well as being its diamond hub, manufacturing, and a substantial amount of trading, is largely carried out in Surat, several hours from Mumbai.

Although the majority of businesses will move to the BDB from the Opera House area, most, if not all, the Surat-based firms are likely to stay put. That is not purely because of the distance, but also because the Municipal Corporation of Greater Mumbai charges a 2 percent tax on cut and polished diamonds while the Surat authorities do not.

This is an important factor for the diamond industry even though the tax rate is relatively low, because much of India’s diamond cutting and polishing industry specializes in low-value, high-volume stones where profits are relatively low. In addition, the pipeline for processing smaller diamonds takes at least three months, if not longer, so the need for a high turnover of goods and lower taxes is vital.

Most of the processing is carried out in Surat, and then the diamantaires move them to foreign exchanges for sale. As a result, the BDB is unlikely to play a part in this process due to the burden of taxes. Mehta says the issue has been taken up with the state and municipal authorities, and he hopes action can be taken.

Facets