Nirav Modi, Chairman, Firestar Diamond
Rank in the Rich List: 63
Net Worth: $1.52 billion
The Big Challenge Faced in the Last Year
With the global financial crisis, diamond prices fell by as much as 40 percent and industry morale dipped even further. There was widespread industry sentiment that consumers would simply stop buying diamond jewellery.
The Way Forward
From being an exclusive jewellery brand, Nirav Modi will now be sold at the brand’s flagship retail outlets. The first such store opened in New Delhi and the next one is slated for Mumbai.
Nirav Modi cannot draw, but design is his calling card. How this works: He communicates his ideas in writing or by verbally discussing the brief with his designers, who then create a prototype. Multiple iterations are a norm till he gets what he is looking for. Nothing is cleared without his approval.
His eye for design is what catapulted him onto the global stage and defines his uber luxury eponymous jewellery brand Nirav Modi. “And I draw inspiration from anywhere, and at any time,” he tells Forbes India. Like in 2008, when the third-generation diamantaire noticed his daughters playing with a non-descript hair band, taking turns to wear it as a bangle on their tiny wrists. He thought: Why not create an expandable bangle, set in diamonds, much like this hair band?
It took his craftsmen two years to produce a piece that met Modi’s exacting standards. Today, this 1,600-diamond Embrace bangle, with 800 locks, is considered one of his foremost creations. Priced at Rs 15 lakh, the bangle even fascinated American filmmaker Steven Spielberg so much that he insisted on trying it on, recalls Modi.
Over the years, the jeweller has become renowned for his fluid designs. There is minimal use of gold, so much so that it is almost invisible. His necklaces, for example, shift in tandem with the wearer’s body movements. His collection is priced between Rs 10 lakh and Rs 50 crore. Modi, among the leading super luxury diamond jewellers in the world, says he counts six of India’s top 10 billionaires among his regular clients. His company Firestar Diamond had a turnover of nearly Rs 10,800 crore for FY14. The company did not divulge its profits.
“Exclusivity is important for us. We make only exceptional pieces, many a times only one of a kind. That’s why every piece of ours is a labour of love,” says Modi, who was brought up in Antwerp, Belgium.
Till 2010, Modi only catered to the American markets, selling loose diamonds to jewellery makers, and ready jewellery to retail outlets in the US. It was at that point that he decided to create a luxury brand, and the very niche customer base for this was reached only by word of mouth.
But this year he has embarked on a new journey: He has taken a retail route, with plans for 100 Nirav Modi stores globally over the next 10 years. The first of his flagship stores was launched this March in New Delhi.
But this move sets Modi a new challenge: Balancing easier access to his designs with exclusivity, while not compromising on either.
A Family Business
Modi was born into the business. His late grandfather Keshavlal Modi was among the first set of diamond merchants from Palanpur (in the Banaskantha district of Gujarat) who entered the business in the 1920s, selling rough diamonds. He moved to Mumbai in the 1930s and to Singapore in the mid-1940s.
In the 1960s, Modi’s father Deepak Modi shifted his business to Antwerp, the industrial hub and the global centre for diamond trading. Nearly 84 percent of the world’s rough diamonds pass through Antwerp’s diamond district, also known as the Diamond Quarter.
Dinner-table conversations would almost always revolve around diamonds, chuckles Modi, recalling how he wanted to be a music conductor when he was young but lacked the flair for it.
He, however, knew where he was destined to be. In 1990, at the age of 19, he quit the Wharton School of the University of Pennsylvania in the US, and jumped straight into the trade. Modi’s maternal uncle, Mehul Choksi, chairman and managing director of Gitanjali Group, one of India’s largest diamond companies, was looking to start a jewellery factory in India and invited Modi to join the new initiative. Modi, who wanted to be in the emerging market, took up the offer and moved to India to learn the ropes of the diamond business.
With Choksi, Modi started out with a salary of Rs 3,500 per month. But his role kept expanding. With time, he began to earn a share of the profits from a business vertical focussed on procurement and design. This, along with his earnings from financial investments, would provide the seed capital for his entrepreneurial venture. In 1999, he floated Firestar Diamond, selling diamonds to the US market, with clients including large retail chains with over 20,000 stores and to the US Armed Forces.
Given his reputation in the diamond industry from his time at Gitanjali Group, many companies extended him hundreds of crores of credit without demanding any collateral or contract. Despite a small capital base, he was able to grow exponentially.
His business model proved crucial. In the 1990s, retailers would typically buy large parcels of diamonds with a mix of qualities, shapes and sizes, and assort them according to the requirements of the jewellery. “But we decided to supply diamonds as per the clients’ requirements,” he says. So, his company would assort the diamonds as per size, colour, weight and size. This ensured clients got exactly what they wanted, saving on cost and time.
A natural progression was starting his jewellery line and, by 2010, this was an idea whose time had come. That year, an intricately designed necklace by Modi fetched an impressive $3.56 million at a Christie’s auction in Hong Kong. The lattice work necklace in pink and colourless diamonds had a pear-shaped 12.29 carat Golconda diamond at its centre. With this creation, Modi became the first Indian jeweller to get featured on the cover of Christie’s Hong Kong auction catalogue. “It’s not usual for us to put a first-time designer’s work on the cover of our auction catalogue,” Rahul Kadakia, head of Christie’s jewellery department in New York, had told Forbes in 2013. “But we were struck by Nirav’s fluid design.”
The auction not only marked the recognition of Modi as an elite jewellery designer but also led to the launch of his brand by the end of 2010.The Retail Challenge
Modi acknowledges that retail is a new field for him and that is why he is trying to take one step at a time. “There is no luxury jewellery brand in India and our ambition is to create Nirav Modi as Asia’s first luxury brand,” he says. Ten of the 100 outlets planned would be in India.
“We want to broaden the [customer] base and will now sell jewellery priced from Rs 2.5 lakh onwards,” says Modi. But here’s the rub: “In the luxury category, it’s a challenge to keep the personal touch if one over-expands,” says Rajat Wahi, partner, KPMG, and an expert on consumer and retail management consulting.
Another expert says brand expansion, particularly in the luxury segment, is fraught with challenges. Identifying real estate that is suitable for a luxury brand is not easy, says Abhay Gupta, founder and chief executive at Luxury Connect. “Also, there is a severe shortage of talent for retail in all categories. In jewellery, one has to go the extra mile, in terms of doing background checks, insurance, training, etc.” To that end, as a run-up to its expansion plans, Firestar has developed its in-house training modules.
Firestar is looking at investing Rs 2,000 crore over the next five years to establish 50 Nirav Modi stores across the globe. All these outlets, as of now, will have jewellery manufactured at their factory at the Maharashtra Industrial Development Corporation, in Mumbai’s western suburb of Andheri. The company has a team of 40 designers, 200 workers, and a master craftsman from New York. There is another factory in Surat, which makes Firestar jewellery that is sold at various US outlets. Firestar also has manufacturing units in Russia, Armenia and South Africa. Rough diamonds are sourced directly from Moscow and South Africa.
Modi is bullish about his retail plans for more than one reason. “Besides the obvious use of diamonds as a means to enhance beauty, customers are buying these rare stones for two more reasons, as family heirloom and investment,” he says. “Our customers want something that they would enjoy for several years and pass on to their children, something that has high investment value.”
The Investment Question
But whether diamonds have resale value or not is a point of contention. Renu Kapoor, director, Indian Institute of Jewellery, says one can get better returns by investing in a mutual fund or by keeping the money in a bank. “Very often one is told that the cut of a solitaire bought as recently as 10 years ago is now outdated. Since there is no demand for that particular cut currently, there is no appreciation,” she says.
Amit Rathi, managing director, Anand Rathi Financial Services Ltd, never advises his wealth management clients to consider diamonds for investments. “This is a passion-driven purchase, the decision is not rational,” he says, explaining that since the 1990s, real estate has given returns of 10 to 14 percent CAGR (compound annual growth rate), compared to the 4 to 5 percent appreciation a year for diamonds.
But Modi is unfazed. He says the demand for original diamonds will not abate, particularly because they are becoming scarcer. To emphasise the authenticity and value of his products, Modi has a buyback and exchange policy. He exchanges Nirav Modi jewellery at 90 percent of the current value in the first three years of purchase. He also points out that white diamonds have doubled in value over the last decade. “We believe this trend will continue on an upward graph, making diamonds a great investment. They also have far less volatility than gold,” he says.
Attention To Detail
This quiet confidence is evident at the 28,000 sq ft Nirav Modi lounge in Lower Parel, Mumbai. The space is plush without being overwhelming. Decorated with works of art by the likes of Amrita Sher-Gil and Francis Newton Souza, the sprawling lounge has plush sofas, luxuriant curtains and sparkling clean mirrors, where his clients are attended to with discretion. The jewellery is not displayed in racks but brought out from the vaults one at a time, for viewing on velvet-lined trays. While the team is friendly and attentive, they give buyers time and space to mull over and try products.
This is a quality Modi insists on. “He has an uncanny quality of achieving a comfort level with any person he is with,” says Choksi, Modis’ uncle, who attributes the soft-spoken Modi’s success to three factors: A creative mind, a taste for finer things and an ability to connect with others.
Also, business acumen. Modi, who has single-handedly created a billion-dollar company in 15 years, has been quick to recognise industry dynamics. For example, in the 2000s, he realised that jewellery-making was shifting from the US to cost-effective markets like India and China; America, on the other hand, was developing into a huge retail market.
With that in mind, in 2005, he acquired a stake in Frederick Goldman, his biggest customer in the US. That got him a route into the American jewellery retail market, with access to stores like JC Penney, Walmart and Sears. This deal took him over a year as Frederick Goldman was then seven times the size of Firestar and competition for the acquisition was fierce.
“I actually asked him if he knew what he was doing! He told me how he had analysed the global trends in manufacturing and supply chain, the advantages Firestar had and that he had a strong resolve to see this through. And Nirav has continued to leapfrog in his business ventures in this way,” says Vipul Ambani, president, finance and corporate development, Firestar Diamond.
In 2007, Modi expanded his US distribution through a majority partnership in Sandberg & Sikorski, a vendor to the US Armed Forces and owners of the 120-year-old luxury bridal jewellery brand, A Jaffe. So far, Modi has spent $50 million in acquisitions, and continues to look for more opportunities.
For him, the next big step towards diversification is watches. That could be about five years away, he says.
Despite the profusion of diamonds around him, Modi is understated. His only claim to bling: An ‘endless band’, an unbroken line of diamonds set in an almost invisible 18k white gold band. It took 20 years to create this product in exactly the way he had envisaged it. “It’s a promise that never ends,” he says about the ring on his finger. Much like the one he made to himself over 15 years ago.
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(This story appears in the 16 October, 2014 issue of Forbes India. To visit our Archives, click here.)