RATING RATIONALE
01 Oct 2020
Rameshvar Impex
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.7.00 Crs. of Rameshvar Impex
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
| Open Cash Credit / Cash Credit (Hypothecation/Pledge) Sanctioned | 07.00 | Long Term | BWR BB - (Stable) |
| Sub Total | 07.00 | ||
| Grand Total | 07.00 | (Rupees Seven Crores Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR has essentially relied on Audited ?nancials up to FY19, provisional ?nancial for FY20, projected ?nancial, publicly available information and information & clari?cations provided by management.
The rating draws comfort from experienced promoters with long standing established relationships with clients and moderate financial risk profile. However, the rating is constrained by small scale of operation, exposure to intense competition and partnership nature of constitution.
BWR believes that Rameshvar Impex business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.
KEY RATING DRIVERS
Credit Strength:
- Moderate financial risk profile: The firm's financial risk profile is moderate, reflected by low gearing at 1.02x as against 1.06x last year and TOL/TNW at 2.78x and 4.72x in FY18 and FY19 respectively. Debt protection metrics are moderate indicated by DSCR and ISCR at 1.97x and 2.06x respectively in FY19 and Tangible net worth at Rs.7.29 Cr as on 31st March, 2019.
- Experienced promoters: The firm benefits from the experienced promoters who has an extensive experience in the diamond business for more than two decades. Over these years, the promoters have established strong relationships with customers and suppliers in domestic as well as international markets.
Credit Weakness:
- Small scale of operation: RSIP’s business profile is constrained by its small scale of operations, despite consistent improvement in revenue to Rs.66.05 Cr in FY19 (FY18: Rs.48.18 Cr, FY17: Rs.45.70 Cr) on account of increased order execution.
- Operating profit margins susceptible to movement in the foreign currency and working capital intensive operation: Mostly the rough diamonds are being imported from Belgium and Israel and being sold to local market, the firm's profit margins are exposed to the foreign exchange fluctuation risk as the firm has not adopted any hedging policy to avert such risks. Over and above, due to working capital intensive nature of operation, firm's operating cost remains high and puts pressure on profit margins.
- Exposure to intense competition in diamond business and partnership nature of constitution: The diamond business is highly competitive due to large number of players in the market. Further, the partnership nature of the constitution exposes the Firm to inherent risk of capital withdrawal by the partners in the event of personal contingencies.
ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA
For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Rating Sensitivities
The firm’s ability to increase its scale of operations, improve profitability, efficiently manage its working capital requirements and strengthen its liquidity and overall credit profile would be the key rating sensitivities.
Positive:
• Improvement in the credit metrics and liquidity position would be positive for the rating.
Negative:
• Delays in receivables realizations.
• Any decline in the revenue and EBITDA margin leading to deterioration in the credit metrics as well as tight liquidity would be negative for the rating.
LIQUIDITY POSITION
Liquidity - Stretched: The firm has reported a net cash accruals of Rs.0.64 Cr and outstanding receivables of Rs.22.82 Cr as on 31st March, 2019. Receivable days is deteriorated to 87 days in FY19 (FY 18: 69 days). Liquidity is stretched as reflected by elongated conversion cycle of 68 days in FY19 (FY 18: 51 days) due to lower credit period received by the suppliers and cash credit utilization is high I.e. approx 85% in last six months. Current ratio is moderate at 1.19 times and Cash and bank balance are low at Rs.0.05 Cr as on 31st Mar 2019.
PROFILERameshvar Impex (RSIP) was formed in 2011 by Haresh Bhai Miyani, Mukesh Bhai Vaghani and Hiren Bhai Kevadiya and is engaged in the business of cutting and polishing of diamonds. The firm imports large diamonds mostly from Belgium and Israel (90% of import) and does in-house processing at its manufacturing unit at Surat, Gujarat and then sells to local market like Gujarat, Maharashtra etc (95% of sales). The firm used to export to various international markets like Hong kong and Bangkok but has stopped due to profit margin issue.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 18-19 (Audited) |
FY 17-18 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 66.27 | 48.18 |
| EBITDA | Rs.Crs. | 1.65 | 1.25 |
| PAT | Rs.Crs. | 0.68 | 0.49 |
| Tangible Net Worth | Rs.Crs. | 7.29 | 6.81 |
| Total Debt/Tangible Net Worth | Times | 1.02 | 1.06 |
| Current Ratio | Times | 1.19 | 1.30 |
NON-COOPERATION WITH PREVIOUS RATING AGENCY ,IF ANY
| CRA Name | Date | Amount | Rating |
|---|---|---|---|
| India Ratings | 06 Aug 2020 | 7.88 | IND B+/A4 (issuer not cooperating) |
| S.No | Current Rating (2020) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2019 | 2018 | 2017 | ||||
| Fund Based | ||||||||||
| 1 | Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Sanctioned | Long Term | 07.00 | BWR BB-(Stable) | NA | NA | NA | |||
| Total | 07.00 | (Rupees Seven Crores Only) | ||||||||
BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.
Hyperlink/Reference to applicable Criteria : For More Information Contact:| Analytical Contacts | Investor Contacts |
|---|---|
|
Pratik Panda Lead Analyst pratik.p@brickworkratings.com |
Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com |
|
Dileep Narayan Singh dileep.s@brickworkratings.com |
|
| 1-860-425-2742 | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Open Cash Credit / Cash Credit (Hypothecation/Pledge)Sanctioned | 7.00 | _ | 7.00 |
| Total | 7.00 | |||
| TOTAL (Rupees Seven Crores Only) | ||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| NA | NA | NA | NA | NA | NA |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NA | NA | NA | NA |
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Brickwork Ratings (BWR), a SEBI registered Credit Rating Agency, accredited by RBI and empaneled by NSIC, offers Bank Loan, NCD, Commercial Paper, MSME ratings and grading services. NABARD has empaneled Brickwork for MFI and NGO grading. BWR is accredited by IREDA & the Ministry of New and Renewable Energy (MNRE), Government of India. Brickwork Ratings has Canara Bank, a leading public sector bank, as its promoter and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.
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