RATING RATIONALE
10Dec2024
Twara Diam
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 54.00 Crs. of Twara Diam
Particulars| Facilities** | Amount(Rs.Crs.) | Tenure | Rating# | |
|---|---|---|---|---|
| Fund Based | 29.00 | Long Term |
BWR BBB -
/Stable Assignment |
|
| (10.00) | ||||
| 25.00 | Short Term |
BWR A3
Assignment |
||
| (10.00) | ||||
| (25.00) | ||||
| Grand Total | 54.00 | (Rupees Fifty Four Crores Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
*** The sub limit of cash credit for Rs.10.00 cr is a sublimit of "Foreign bills discount". The firm is trying to link with various banks for the proposed CC limits of Rs. 24.05 cr RATING ACTION / OUTLOOK
BWR has assigned the long term rating of BWR BBB-/Stable/BWR A3 for the bank loan facilities of Twara Diam.
The rating draws strength from Management Experience and Moderate Financial Profile. However, the rating is constrained on account of exposure to volatility in diamond prices amidst intense competition in the industry and the constitution of the entity being a partnership firm. The rating outlook has been assigned as "Stable" as BWR believes that Twar Diam 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 profits show sustained improvement. The rating outlook may be revised to 'Negative' if the financial risk profile goes down.
KEY RATING DRIVERSCredit Strengths:
-
Established track record of operations and management experience :
Twara Diam began its operations in 1978 from a small unit with just 10 polishing wheels, the firm now polishes over 1.5 million stones on monthly basis, with the potential to increase this to 2.5 million. Mr. Gaurang Italiya partner having more than 23 years of experience in the diamond industry and are involved in the sales and marketing operations of the firm. Mr. Shailendra Italiya, partner having more than 20 years of experience in the diamond industry and are involved in the manufacturing / trading operations of the firm in Bhavnagar. Mr. Chetan Dulabhai Italiya, is having more than 20 years of experience in the diamond industry and are
involved in the manufacturing / trading operations of the firm in Surat. Mr. Rakesh Jasoliya partner having more than 18 years of experience in the diamond industry and are involved in the import and export operations of the firm. -
Moderate financial risk profile :
The revenue decreased to Rs. 422.90 cr during FY24 (PY: Rs. 807.63 cr). The OPBDIT increased to Rs. 15.49 cr during FY24 (PY: Rs. 14.39 cr). The PAT stood at Rs. 11.27 cr during FY24 (PY: Rs. 10.43 cr). The total debt / TNW remained comfortable at 0.59x during FY24 (PY: 0.38x) . The long term debt / TNW stood at 0 during FY24 (PY: 0) as there are no long term borrowings availed by the firm. The operating profit margin improved to 3.66% during FY24 (PY: 1.82%) . The net profit margin improved to 2.67% during FY24 (PY: 1.29%) . The ISCR improved to 5.29x during FY24 (PY: 4.44x) on account of decrease in the interest expense during FY24.
-
Constitution of the entity being partnership firm :
The firm's constitution as a partnership firm has the inherent risk of possibility of withdrawal of the partner’s capital at time of personal contingency and firm being dissolved upon the death/retirement/insolvency of partners. Moreover, partnership firms have restricted access to external borrowing as credit worthiness of partners would be the key factor affecting credit decision for the lenders. This financial strain can hinder the partnership’s ability to meet obligations and invest in growth opportunities which in turn affect the operating efficiency of the organization
-
Susceptibility of operating performance to volatile diamond prices amidst intense competition :
Low entry barriers, capital requirement and technology requirements have led to fragmentations of the diamond industry into numerous unorganized players across the country leading to intense competition. The firm is also exposed to risks related to volatility in diamond prices. Impact of volatility of raw material prices and demand on the revenue and operating margins remains a key monitorable over medium term.
For arriving at its ratings, BWR has considered the standalone performance of Twara Diam. BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Going forward, the ability of the company to improve its revenue and financial risk profile would remain the key rating sensitivities.
Positive:
- The ratings will be upgraded if the margins are above 5.00% on a sustained basis.
Negative:
- Rating may be downgraded if the margins are below 5% on a sustained basis.
The liquidity of the firm is strong marked by no long term loan. The firm has no current portion of long term debt (CPLDT) 31 Mar 2024 and 31 Mar 2025. The average working capitalization stood at approx. 30% during the last 1 year period. The cash and bank balance of Rs 6.25 cr as on Mar 31, 2024 including FD of Rs. 5.88 cr. The net cash accruals stood at Rs. 12.57 cr during FY24. The tangible networth stood at Rs. 29.20 cr as on 31 Mar 2024. The total debt / TNW stood at 0.59x as on 31 Mar 2024 and the ISCR stood at 5.29x during FY24. The long term debt / TNW stood nil as on 31 Mar 2024. The ISCR stood at 5.29x during FY24 and the DSCR stood at 5.37x during FY24. The current ratio stood healthy at 1.13x during FY24.
ABOUT THE ENTITY| Macro Economic Indicator | Sector | Industry | Basic Industry |
|---|---|---|---|
| Consumer Discretionary | Consumer Durables | Consumer Durables | Gems, Jewellery And Watches |
Twara Diam, set up in 1978, is engaged in cutting and polishing of diamonds. The firm is also engaged in trading of rough as well as polished diamonds. The firm deals with a vast variety of diamonds such as round diamond, fancy cut diamond, oval diamond, Heart diamond, Pear diamond, Princess cut, Cushion diamond, Radiant diamond. Further, most of the revenues from the firm is from small carat diamonds (below 0.3 carats).From a small unit with just 10 polishing wheels, the firm now polishes over 1.5 million stones on monthly basis, with the potential to increase this to 2.5 million. The firm’s experience has positioned it as a leading manufacturer of polished diamonds, supplying not only across India but also to markets in Hong Kong, China, and the United States. Twara Diam source its diamonds locally and imported through countries like China, Russia, UAE, etc. Moreover, Twara Diam holds the Two Star Export House designation from the Ministry of Commerce and Industry, Government of India. The firm has also received registration cum membership certificate from Gem&Jewellery Export Promotion Council. The capacity production is for 2.5 million stones per month and utilized is 1.5 million stones per month.
KEY FINANCIAL INDICATORS (Standalone)
| Key Parameters | Units |
FY 21 - 22 (Audited - Annual) |
FY 22 - 23 (Audited - Annual) |
FY 23 - 24 (Audited - Annual) |
|---|---|---|---|---|
| Operating Revenue | Rs.Crs. | 447.14 | 807.63 | 422.90 |
| EBITDA | Rs.Crs. | 6.44 | 14.69 | 15.49 |
| PAT | Rs.Crs. | 3.72 | 10.43 | 11.27 |
| Tangible Net Worth | Rs.Crs. | 14.79 | 23.67 | 29.20 |
| Total Debt / Tangible Net Worth | Times | 0.43 | 0.38 | 0.59 |
| Current Ratio | Times | 1.10 | 1.13 | 1.13 |
Standard covenants applicable
STATUS OF NON-COOPERATION WITH PREVIOUS CRA
Not Applicable
ANY OTHER INFORMATIONNil
RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)| Facilities | Current Rating (2024) | 2023 | 2022 | 2021 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 29.00 |
BWR BBB-/Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| FB SubLimit | LT | (10.00) |
BWR BBB-/Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| Fund Based | ST | 25.00 |
BWR A3
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| FB SubLimit | ST | (10.00) |
BWR A3
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| (25.00) |
BWR A3
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| Grand Total | 54.00 | (Rupees Fifty Four Crores Only) | |||||||
- General Criteria
- Approach to Financial Ratios
- Trading Entities
- Short Term Debt
- Manufacturing Company
| Analytical Contacts | |
|---|---|
|
Vaishali Khandelwal Rating Analyst vaishali.k@brickworkratings.com |
Hari Kishan Yadav Associate Director - Ratings hari.ky@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | Complexity of the Instrument |
|---|---|---|---|---|---|---|
| 1 | Cash CreditProposed | 24.05 | _ | 24.05 | Simple## | |
| 2 | Axis Bank Ltd. | Cash CreditSanctioned | 4.95 | _ | 4.95 | Simple## |
| 3 | IndusInd Bank | Foreign bills discountSanctioned | _ | 25.00 | 25.00 | Simple## |
| Sub-Limit (Cash Credit) Sanctioned | (10.00) | |||||
| Sub-Limit (Export packing credit) Sanctioned | (10.00) | |||||
| Sub-Limit (Working Capital Demand Loan) Sanctioned | (25.00) | |||||
| Total | 29.00 | 25.00 | 54.00 | |||
| TOTAL (Rupees Fifty Four 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.
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate (%) | Maturity Date | ISIN Particulars | Complexity of the Instrument |
|---|---|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil | Nil | Nil |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| Nil | Nil | Nil | Nil |
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