Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 35.50 Crs. of Golkunda Diamond and Jewellery Limited
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (20 Nov 2020) |
Present | ||
| Fund Based | 35.00 | 35.00 | Long Term |
BWR BBB-/Stable
Upgrade |
BWR BBB -
/Stable Reaffirmation |
| Non Fund Based | 0.50 | 0.50 | Short Term |
BWR A3
Upgrade |
BWR A3
Reaffirmation |
| Grand Total | 35.50 | 35.50 | (Rupees Thirty Five Crores and Fifty lakhs Only) | ||
Brickwork Ratings reaffirms the rating to BWR BBB- (Stable)/BWR A3 for the bank loan facilities amounting to Rs. 35.50 Crs. of Golkunda Diamond and Jewellery Limited. BWR believes that Golkunda Diamond and Jewellery Limited's 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 backed by a favorable industry scenario. The rating outlook may be revised to 'Negative' if the revenues and profit margins show lower than expected figures.
BWR has essentially relied upon the audited financial statements of Golkunda Diamond and Jewellery Limited for FY19, FY20 and FY21, and projections for FY22 and FY23, and publicly available information and information/clarifications provided by the entity’s management.
The rating draws strength from established presence in the jewellery manufacturing industry, moderate financial risk profile, improving scale of operations, and increasing networth. The rating is however constrained by elongated working capital cycle, customer concentration risk, changes in government regulations, exposure to intense competition, exposure to risk arising from foreign exchange fluctuations.
Going forward the ability of the company to maintain its overall financial risk profile would be its key rating sensitivity
KEY RATING DRIVERSCredit Strengths:
The three-decade-long experience of the promoter in the diamond jewellery industry, and their longstanding relationships with customers, have helped the firm to navigate business cycles over the years.
The company has a moderate financial risk profile as indicated by moderate gearing of 1.08X with no long-term debt repayment obligations in FY21. The company has moderate coverage indicators reflected by ISCR & DSCR of 3.78X & 3.23X in FY21 improving from 2.50X & 2.80X in FY20. Further, the company continues to have moderately liquidity as indicated by the current ratio of 1.53X in FY21
The net sales of the company have grown by 30.85% in FY21 and stand at Rs 171.12cr. The net profit of the company has improved and stands at Rs 2.69cr in FY21 increasing from Rs 2.18cr in FY20. The company has earned a total operating income in tune of Rs 116.89cr in H1FY22
The Net Worth of the company has been improving on Y-o-Y basis and currently stands at Rs 30.52cr in FY21 increasing from Rs 28.00cr in FY20 and 27.01cr in FY19 on account of ploughing back of profits. Further, the company has no long term debt repayment obligations.
Working capital cycle of the company as indicated by Net Sales to Gross Current Assets has improved but stands elongated at 41.10% in FY21 vis-a-vis 47.26% in FY20.
The company is exposed to customer concentration risk as its top five customers account for nearly three-fourths of its revenues.
As the company is into 100% exports, changes in economies or government policies of the countries to which the company is exporting and India may affect the operations and thereby revenue generation of the company.
The jewellery industry is highly fragmented due to the presence of a large number of small and big players, which constrains profitability. The industry players have to continuously offer new designs and adopt innovative marketing practices to attract and retain customers. Further, the jewellery sector had seen heightened regulatory action in the past, and the company will remain susceptible to changing regulatory norms.
As the Company is involved in imports and exports as well, it is susceptible to risks arising from adverse changes in foreign exchange rates. Foreign exchange fluctuations have a direct bearing on the profitability of the Company. However, the risk for same is mitigated as the company imports in same proportion as the exports reducing the risk and creating a natural hedging mechanism.
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
Going forward,the company's ability to increase the scale of operations along with improved profitability, steady cash accrual and efficiently manage its working capital requirement should continue to enhance the financial risk profile and liquidity
Upward factors
Downward factors
Golkunda Diamonds & Jewellery Ltd incorporated on 30th October 1990, is a BSE listed company,engaged in the manufacturing of diamond studded gold jewelleries from India and exporting to customers across the world. The company is managed under the leadership of Mr. Kanti Kumar Dadha (Chairman & Managing Director) who is well experienced in the jewellery business
| Standalone Financial Indicators (in ₹ crore) | Units | FY 20-21 (A) | FY 19-20 (A) | |
|---|---|---|---|---|
| Operating Revenue | Rs.Crs. | 173.46 | 132.75 | |
| EBITDA | Rs.Crs. | 5.34 | 4.82 | |
| PAT | Rs.Crs. | 2.69 | 2.18 | |
| Tangible Net Worth | Rs.Crs. | 30.52 | 28.00 | |
| Total Debt/Tangible Net Worth | Times | 1.08 | 1.05 | |
| Current Ratio | Times | 1.53 | 1.66 | |
|
* A:Audited UA:Unaudited P:Provisional PROJ:Projected
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Note: These are latest available financial results. All ratios as per BWR's calculations; Amount in ₹ crore
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| Facilities | Current Rating (2022) | 2021 | 2020 | 2019 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 35.00 |
BWR BBB-/Stable
(Reaffirmation) |
NA |
NA
|
20Nov2020 |
BWR BBB-Stable
(Upgrade) |
04Nov2019 |
BWR BB+ Stable
(Upgrade) |
| NA |
NA
|
NA |
NA
|
NA |
NA
|
06Feb2019 |
BWR BB Stable
(Reaffirmation) |
||
| Non Fund Based | ST | 0.50 |
BWR A3
(Reaffirmation) |
NA |
NA
|
20Nov2020 |
BWR A3
(Upgrade) |
04Nov2019 |
BWR A4+
(Upgrade) |
| NA |
NA
|
NA |
NA
|
NA |
NA
|
06Feb2019 |
BWR A4
(Reaffirmation) |
||
| Grand Total | 35.50 | (Rupees Thirty Five Crores and Fifty lakhs 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| Analytical Contacts | |
|---|---|
|
Mita Ghanshyam Gupta Ratings Analyst mita.g@brickworkratings.com |
Sushil Kumar Chitkara Director - Ratings Board : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@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.) | |
|---|---|---|---|---|---|---|
| 1 | State Bank Of India (SBI) | Packing Credit in Foreign Currency (PCFC)Sanctioned | 15.00 | _ | 15.00 | |
| 2 | State Bank Of India (SBI) | Credit Exposure Limit (CEL)Sanctioned | _ | 0.50 | 0.50 | |
| 3 | State Bank Of India (SBI) | Pre ShipmentSanctioned | 20.00 | _ | 20.00 | |
| Total | 35.00 | 0.50 | 35.50 | |||
| TOTAL (Rupees Thirty Five Crores and Fifty lakhs Only) | ||||||
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