Ritesh Export

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 99.96 Crs. of Ritesh Export

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous (24 Mar 2022)	Present
Fund Based	81.78	99.37	Long Term	BWR BBB-/Stable Reaffirmed	BWR BBB /Stable Upgrade
	0.81	0.59	Short Term	BWR A3 Reaffirmed	BWR A3 + Upgrade
Grand Total	82.59	99.96	(Rupees Ninety Nine Crores and Ninety Six lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
Note: Rating review done for enhancement of bank loan, that is addition of GECL loans amounting to Rs 21.29 Crs.

RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) has upgraded its rating on the bank loan facility of Ritesh Export (the firm) from BWR BBB-/Stable (long-term facility) and BWR A3 (short-term facility) to BWR BBB/ Stable (long-term facility) and BWR A3+ (short-term facility).

The rating continues to reflect its partners' extensive experience in the diamond industry, along with a well-established customer base. The rating is backed by the firm's ability to achieve projected sales comfortably on the basis of its past performance, consistently increasing TNW (Tangible Net Worth), stable margins and adequate liquidity. The strength is slightly constrained by the intensely competitive diamond industry and volatility in the prices, foreign exchange risk and its large working capital requirements.

Rating Outlook: Stable

The Stable outlook reflects that the firm will continue to benefit from the extensive experience of its promoters in the CPD industry and diversified customer base.

 The rating outlook may be revised to ‘Positive’ in case revenues and profit show a sustained improvement. The rating outlook may be revised to ‘Negative’ if the revenues go down and profit margins show lower-than-expected figures and any delays in the timely execution of orders in hand.

KEY RATING DRIVERS

Credit Strengths:

• Established market presence, backed by promoters experience: :

  Supported by the extensive experience of the partners, Ritesh Exports has established its position in domestic and international cut and polished diamond markets for more than three decades. The firm is a family-run business, and the promoters have maintained longstanding relations with customers while successfully navigating through several business cycles over the years. The firm's diversified customer base enables a high bargaining power with its customers, and deep insight into consumer buying patterns; thus, the firm can identify emerging market trends early. It operates in the US, Belgium and Hong Kong, among other regions, and derives around 50% revenue from exports.

   

Credit Risks:

• Susceptibility to volatile diamond prices amid intense competition, resulting in moderate operating profit margins: :

  The diamond industry is highly fragmented because of low entry barriers on account of relatively low capital and technology requirements, attracting numerous unorganised players across the country. Ritesh Exports is also exposed to risks related to volatility in diamond prices. The firm maintains an inventory of rough and polished diamonds, of which rough diamonds are usually procured from the international market. This makes the firm vulnerable to fluctuation in diamond prices and with relatively limited value addition operating profitability has been moderate at around 4% to 5% through 2021 and 2022.

   

• Large working capital requirements: :

  Although intensive working capital requirements would continue to be a challenge, the firm considerably improved its receivable and inventory holding position from 132 days and 105 days as on 31 March 2021 to 85 days and 75 days as on 31 March 2022, respectively. As a result, the conversion cycle improved from 177 days as on 31 March 2021 to 125 days as on 31 March 2022 and is expected to continue along the same levels.

• Foreign currency fluctuation risk: :

  The firm is exposed to foreign currency fluctuation risk with regard to assets and liabilities denominated in foreign currency. However, the firm uses forward exchange contracts to hedge its exposure in foreign currency risk in respect of recognised assets and liabilities, and cash flow arising from highly probable future forecasted transactions.

ANALYTICAL APPROACH - Standalone

BWR has essentially relied on standalone audited financial statements up to FY 2022, as well as publicly available information and information/clarification provided by the company and the lenders. The standalone approach has been adopted as there is no dependability on other group companies.

RATING SENSITIVITIES

Going forward, the firm’s ability to increase its operating profit margins and achieve the envisaged scale of operations and profitability would be key rating sensitivity.

Positive: -

Improvement in working capital cycle on a sustained basis

Improvement in operating profit margin on a sustained basis

Improvement in current ratio to 1.79, showing the adequate cash flows of the company for the next 12 months

Negative: -

The TOL/TNW improved from 1.3 in  FY21 to 1.15 in FY22, but is showing a projection of 1.27 in FY23, which is not favourable, but the overall TOL/TNW is very much comfortable and is below 1.5 for all the years.

The sales of the firm is increasing rapidly, and concurrently, the firm needs to concentrate on increasing profit margins.

LIQUIDITY INDICATORS - Adequate

The liquidity profile is adequate, with high cash and bank balance maintained by the firm. Nearly Rs11.93 Crs were maintained as cash and bank balance in FY22. The working capital utilisation is high at 92% for the last 12 months. The liquidity is supported by unsecured loans from promoters and family friends.

Moreover, the firm has utilised various funding facilities from banks to meet its obligations.

ABOUT THE ENTITY

Established as a partnership firm in 1986, Ritesh Export is engaged in the cutting and polishing of diamonds. The firm also trades in diamonds. The firm gets manufacturing done on a job work basis. The firm derives its revenues from the processing, as well as trading, of diamonds. The firm has four partners - Mr. Bharat Shah, Mr. Deepak Shah, Mr. Mukesh Shah and Mr. Ritesh Shah. The firm procures rough diamonds mainly from Belgium and Dubai from DTC sightholders and also on an auction basis. The unit is suitably located, capturing a market that consistently grows in the lifestyle, disposable income and standard of living of its inhabitants. It has the proximity to retailers, which becomes advantageous to receive consistent orders.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

The ratings with CRISIL have remained in the INC category since 2020. In 2015, the CRISIL rating for the company was BB+ /Stable A4 and in 2018 the ratings were BBB-/Stable A3. Since 2020, the ratings of the company have been in the Issuer Not cooperating Category. The current rating with CRISIL is B /StableA4 in the Issuer Not Cooperating category as on 27 July 2022.

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2022)			2022 (History)		2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	99.37	BWR BBB/Stable (Upgrade)	24Mar2022	BWR BBB-Stable (Reaffirmed)	17Feb2021	BWR BBB -Stable (Reaffirmed)	NA	NA	05Dec2019	BWR BBB-Stable (Assignment)
Fund Based	ST	0.59	BWR A3+ (Upgrade)	24Mar2022	BWR A3 (Reaffirmed)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	0.00	NA	NA	NA	17Feb2021	BWR A3 (Reaffirmed)	NA	NA	05Dec2019	BWR A3 (Assignment)
Grand Total		99.96	(Rupees Ninety Nine Crores and Ninety Six lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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

• General Criteria
• Trading Entities
• Approach to Financial Ratios

Analytical Contacts
Anithu Joseph Ratings Analyst anithu.j@brickworkratings.com	Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@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	Axis Bank Ltd.	Term Loan - Sanctioned	2.82	_	2.82
2	Bank of India	Post Shipment - Sanctioned	10.30	_	10.30
3	Bank of India	EPC/ PCFC/ FBP/ PSFC - Sanctioned	4.70	_	4.70
4	Bank of India	Covid Term Loan - Sanctioned	0.26	_	0.26
5	Bank of India	GECL 2.0 - Sanctioned	4.00	_	4.00
6	State Bank Of India (SBI)	GECL 2.0 - Sanctioned	7.00	_	7.00
7	State Bank Of India (SBI)	EPC/ PCFC/ FBP/ PSFC - Sanctioned	10.65	_	10.65
8	State Bank Of India (SBI)	Covid Term Loan - Sanctioned	_	_	0.00
9	State Bank Of India (SBI)	Post Shipment - Sanctioned	13.35	_	13.35
10	Union Bank of India	Post Shipment - Sanctioned	24.00	_	24.00
11	Union Bank of India	FCL - Sanctioned	_	0.59	0.59
12	Union Bank of India	GECL 2.0	10.29	_	10.29
13	Union Bank of India	EPC/ PCFC/ FBP/ PSFC - Sanctioned	12.00	_	12.00
Total			99.37	0.59	99.96
TOTAL (Rupees Ninety Nine Crores and Ninety Six lakhs Only)