Rating Rationale

Brickwork Ratings has assigned a long-term rating of BWR BB+/Stable to the bank loan facilities of Rs 53.49 crore of Beyond Star.

The rating takes into consideration Beyond Star's promoters' experience and understanding of the diamond industry, along with the firm's established customer relationships in the lab-grown diamond segment. The firm has recently completed a major capex programme involving the installation of 75 CVD machines for in-house lab-grown diamond manufacturing, with an estimated production capacity of approximately 20,000–25,000 carats per month. The project, with a total investment of approximately Rs. 88.82 crore, has been funded through promoters' capital of Rs. 33.82 crore, term loans of Rs. 52.50 crore and unsecured loans of Rs. 2.50 crore. Further, the installation of a solar power system is expected to reduce electricity costs by approximately 60-70%, supporting operational efficiency.

The rating outlook is assigned as “Stable,” reflecting BWR’s expectation that Beyond Star's  business risk profile will remain steady over the medium term. A stable outlook indicates a low probability of a rating change during this period. The outlook may be revised to “Positive” if the company achieves sustained improvement in revenue and profitability margins, while it may be revised to “Negative” in the event of a deterioration in its financial risk profile.

The terms of sanction include standard covenants normally stipulated for such facilities. 

• Moderate Financial Risk Profile :

  The financial risk profile of the firm is moderate, marked by a moderate net worth, low gearing and moderate debt protection metrics. The tangible net worth improved to Rs.21.69 crore as on March 31, 2026, from Rs.9.92 crore as on March 31, 2025. The firm follows a conservative leverage policy, with gearing of 0.02 times as on March 31, 2026 (0.03 times as on March 31, 2025). Total outside liabilities to tangible net worth (TOL/TNW) improved significantly to 0.04 times as on March 31, 2026, from 2.25 times as on March 31, 2025. Debt protection metrics are moderate, with an ISCR of 5.06 times in FY26, up from 0.75 times in FY25.
   

• Efficient working capital management :

  Gross current assets (GCA) stood at 67-80 days as on March 31, 2026, driven by receivables of 47-50 days and low inventory holding of 44-45 days. The firm manages its receivables prudently and follows a replenishment model for inventory: whenever stock is sold, an equal quantity of diamonds is purchased immediately at prevailing prices. This acts as a natural hedge against the highly volatile prices of the commodity.

• Experienced Promoters and Industry Understanding :

  The firm is managed by promoters with experience in the diamond and jewellery industry, supporting their understanding of sourcing, customer requirements, pricing trends, and market dynamics. The promoters' active involvement in business operations and strategic decisions provides support during the firm's transition from trading activities towards in-house manufacturing. Their ability to leverage existing industry relationships and customer connections will remain important for achieving the projected business growth.

• Expected Improvement in Operating Performance :

  The firm's operating margin improved from 0.02% in FY25 to 0.63% in FY26. Further improvement is projected in FY27, supported by the commencement of in-house manufacturing operations and the expected benefits of operational efficiencies. The firm has also installed a solar power generation system to reduce its dependence on conventional power sources and manage electricity expenses, which constitute a high operating cost for manufacturing activities. The extent of margin improvement will depend on production efficiency, power cost savings, selling prices, and market demand.

• Susceptibility to regulatory framework and intense competition in the diamond industry :

  The diamond and diamond jewellery industry is exposed to evolving regulatory requirements aimed at improving transparency, such as mandatory PAN disclosure for transactions above Rs.2.00 lakh and compulsory hallmarking of the gold content in studded jewellery. While these measures support formalisation of the sector over the long run, they increase compliance costs and may dampen discretionary demand, which could constrain the firm's near-term growth prospects. The industry is also sensitive to trade and sourcing regulations, including import duties, international sanctions and traceability requirements for rough diamonds.

• Constitution as a partnership firm :

  Being a partnership firm, Beyond Star has inherent risk of withdrawal of partner’s capital at the time of personal contingency. It restricts access to external borrowings where net worth and partners creditworthiness are the key factors affecting credit decision of the lender. Hence, limited funding avenues and limited financial flexibility restricts growth in the firm’s scale of operations.

• Execution Risk Associated with the Manufacturing Transition :

  The transition from trading to in-house LGD manufacturing involves operational and commercial risks. The firm needs to establish stable production processes, achieve the planned capacity utilisation and ensure consistent product quality. Any delay in stabilising manufacturing operations could affect revenue generation, profitability and cash flows.

• Competitive and Evolving Industry Environment :

  The LGD industry is characterised by competitive pricing, evolving consumer preferences and the risk of fluctuations in product realisations. The firm's ability to maintain customer relationships, achieve competitive production costs and adapt to changes in market demand will remain important for sustaining profitability.

Going forward, the firm's ability to improve its revenue profile and maintain a comfortable financial risk profile will remain key rating sensitivities.

Postive

• Improvement in the firm's operating scale, along with an improvement in its net profit margin.
• Strengthening of the firm's tangible net worth (TNW), with the total debt/TNW ratio below 1.5x.
• Maintaining adequate debt protection metrics, with the ISCR remaining above 2.0x and the DSCR at around 2.0x.

Negetive

• A decline in the firm's operating scale from the current level, along with a reduction in the net profit margin below 1%.
• A significant decline in the firm's tangible net worth (TNW) from the current level, resulting in the total debt/TNW ratio exceeding 2x. 
• Deterioration in debt protection metrics, with the ISCR declining below 2.0x and the DSCR falling below 1.0x.

The firm maintains an adequate liquidity profile, supported by healthy cash generation and comfortable short-term liquidity. Cash and cash equivalents stood at Rs. 0.86 crore in FY26 (A), while the current ratio stood at 19.90x. Net cash accruals stood at Rs. 0.69 crore in FY26 (A) and are expected to improve to around Rs. 13.59 crore in FY27, against scheduled debt repayment of around Rs. 0.94 crore, providing adequate headroom for debt servicing. Working capital utilisation remained moderate at around 10.97% over the past five months. The firm also has working capital facilities available for utilisation, providing additional liquidity support. The firm's financial risk profile remains comfortable, supported by a strengthening TNW and low leverage. TNW increased from Rs. 9.92 crore in FY25 to Rs. 21.69 crore in FY26 (A), while Total Debt/TNW stood at 0.02x. Debt protection metrics remained comfortable, with ISCR at 5.06x and DSCR at 7.07x in FY26 (A), supported by healthy cash accruals and low leverage.

The firm demonstrates a Adequate ESG profile based on its environmental, social, and governance practices.

Environmental: Beyond Star is engaged in the manufacturing of lab-grown diamonds (LGDs), with operations involving specialised machinery, electricity consumption and water usage. The firm has undertaken initiatives to improve energy efficiency, including the installation of solar power systems, which are expected to reduce electricity costs and its environmental footprint. The firm also takes the necessary steps to ensure proper waste management, workplace safety and compliance with applicable environmental regulations.

Social: The firm's social risks primarily relate to employee health and safety, fair labour practices and working conditions at its manufacturing facility. Compliance with applicable labour laws and workplace safety requirements remains important, particularly given the use of specialised manufacturing equipment. Maintaining product quality and customer relationships is also important for sustaining business operations.

Governance: Beyond Star is a promoter-managed firm, with the promoters actively involved in day-to-day operations and key business decisions. The promoters' experience in the diamond industry supports business management and operational decision-making. However, the firm's governance framework can be further strengthened through formal internal controls, transparent financial reporting and effective monitoring of operational and financial risks.

Beyond Star is a diamond and jewellery business based in Surat, Gujarat, engaged in the trading of lab-grown diamonds and diamond jewellery. The firm has extensive experience in diamond trading and has recently expanded its operations into in-house manufacturing of lab-grown diamonds through the installation of 75 machines. The manufacturing process has a production cycle of around 25-30 days,  with an estimated production capacity of 20,000-25,000 carats per month.

The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated. It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or complexity related to the structural,transactional or legal aspects. Details on the complexity levels of the instruments are available on BWR's website Complexity Levels.

Not Applicable

BWR Board of Directors have no influence over rating decisions, nor do they sit on the rating committee or review, discuss or evaluate any credit rating during the Board meetings.

Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI]. BWR is the 5th agency to get a credit rating registration in India in 2009 and its corporate office in Bengaluru. It has a country-wide presence with representatives in 150+ locations. Canara Bank is an institutional investor in Brickwork.

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