Shrenuj Sees De Beers Rough Supply Suspended, Reduces Botswana Operations

De Beers' rough supply to Shrenuj has been suspended, while the Indian jewelry and diamond manufacturer is also reducing its Botswana operations due to liquidity pressure, rising costs, the decline of the Indian currency and static demand in some main sales markets.

Shrenuj, one of the oldest listed companies on BSE in the diamond and jewelry sector, announced last June that it was "rationalizing" its workforce and in July was ordered to issue a clarification to the Bombay Stock Exchange (BSE) following an order by India's debt recovery tribunal to seize its assets.

Around 21 banks, with a combined exposure of around $450 million to Shrenuj, has obtained court order to repossess the inventory and restrict the travel of its leading officers, the Times of India reported.

The company reported a drop in sales of one-third to $265.7 million in the fiscal year ending March 31, and a $6 million loss.

"In the recent few months, we have been facing strong headwinds in our business, largely due to external factors," Shrenuj spokeperson Pranav Bhargava said. The firm has not bought rough diamonds from De Beers for the last four to five months, he added.

Bhargava said the firm has been hit by liquidity pressure which forced it to downscale operations and to maintain business operations that are profitable, but added that it has access to additional resources.

"Our diamond manufacturing operations suffered relatively more as compared to other verticals and our ability to continuously support purchase under contractual agreements in three sights was affected," said Bhargava. "We are in touch with DBGSS [De Beers Global Sightholder Services] to continue and grow our over three decades of relationships with De Beers. We have always scored high on Best Practice Principle (BPP) parameters and our commitment to the diamond industry is steadfast."

While Shrenuj's sight was suspended in July, the company is in talks with De Beers to resume the supply, Bhargava stressed.

"Our factories and machinery are intact, the rough diamond purchase ability in Antwerp is intact and that our key suppliers are well aware of the developments. Banks have faith in our company and we will be repaying the outstanding dues very soon. This is our transitional phase and we will be working our new terms with De Beers in January 2017," company sources told the newspaper.