| CaratLane Trading Private Limited | ||||
| Rated amount enhanced | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AA/Stable’ rating on the long-term bank facilities of CaratLane Trading Private Limited (CaratLane). |
Analytical Approach CRISIL Ratings has applied its parent notch-up criteria to arrive at the rating for CaratLane. It has also combined the business and financial risk profiles of CaratLane and its subsidiary, as they have operational and financial linkages. Gold metal loan has been considered as part of debt
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Strong support from the parent CaratLane is of strategic importance to Titan and receives strong operational, managerial and financial support from the parent. The key management team of CaratLane is deputed from Titan, which brings in synergies. The company benefits from Titan’s oversight on processes and treasury and also enjoys financial support as its term debt is currently guaranteed by the parent. Furthermore, CaratLane stores are positioned and branded as a Tanishq Partnership benefitting from legacy trust of customers on Titan and Tanishq brands.
Unique market position catering to the youth and affordable jewellery segment CaratLane caters to the domestic online (30% of revenue in fiscal 2022) and offline retail jewellery segment (70%). Operations are carried out through CaratLane website, mobile application and through its network of 138 stores (as on June 30, 2022). Over the years, the company has improved its market position and is established as a leading supplier of designer jewellery at affordable prices. Its online sales are driven by gifting purchases that are often of low value. The company’s average ticket size is Rs 14,000-Rs 25,000, which augurs well for the youth and drives impulse purchases. In fiscal 2022, the operating income expanded by over 75%, driven by strong growth from both online and off-line segments. The opening of 21 new retail stores in fiscal 2022 takes the total store count to 138.
Potential for exponential growth driven by new store additions CaratLane commenced operations as a start-up in the online retail jewellery segment and has witnessed tremendous growth—operating income has expanded at a compound annual growth rate of 45% over the three years ended fiscal 2022. Sales of Rs 1800-2000 crore is expected to be achieved in fiscal 2023, driven by new store additions. Around 90 new stores are expected to be opened in fiscal 2023. The expansion in stores is expected to be achieved with moderate-to-low capital expenditure (capex) as most of them would be smaller format and franchised based stores.
Weaknesses: Moderate though improving financial risk profile Financial risk profile is moderate, marked by small, albeit fast growing networth of Rs 90 crore as on March 31, 2022 (Rs 13 crore a year earlier) attributed to accumulated losses over the years. Financial risk profile is expected to continue to improve over the medium term, driven by sustained profitable operations. Operating margin is expected to expand to 5-6% over the medium term supported by favourable product mix and benefits from operating leverage due to higher scale. Consequently, debt protection metrics are expected to improve over the medium term with interest cover of over 5 times, compared to 1.8 times in fiscal 2021. Financial risk profile also benefits from the strong operational and financial support from the parent.
Operates in a highly competitive business segment Despite its unique market positioning, CaratLane faces challenges of intensifying competition from both national and regional players. Furthermore, the fragmented nature of the industry results in strong competitive pressures. As the company expands its retail footprint, it will also face competition from established players in the respective local markets. |
Liquidity: Strong The strong liquidity position of Caratlane emanates from its established relationship with its parent, Titan, which has a robust credit risk profile and sizeable cash surplus. CaratLane’s standalone liquidity position is adequate, as reflected in modest bank limit utilisation (28% for the 12 months ended March 2022) and improving cash generation. Expected cash accrual of Rs 65-130 crore per annum over the medium term would be sufficient to meet annual repayment obligation of Rs 7-8 crore and capital expenditure of Rs 15-80 crore. Furthermore, the term debt has been guaranteed by Titan and CRISIL Ratings centrally factors in the expectation of timely support from Titan in the event of an exigency. |
Outlook: Stable CRISIL Ratings believes CaratLane will maintain its established market position over the medium term, supported by its unique brand positioning, improving distribution network, and continued operational, managerial and financial support by Titan. The company’s financial risk profile is also expected to improve gradually, driven by better accruals. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Incorporated in 2008 by Mr Mithun Sacheti and Mr Srinivasa Gopalan, CaratLane is an omni-channel brand that designs, manufactures, trades and retails gems and jewellery online as well as through physical stores in India. As of June 30, 2022, the company had a network of 138 stores.
Titan acquired a substantial stake of 66.39% in CaratLane in 2016 to expand its presence online. It further increased its stake by 3.08% in March 2019 by way of private placement of shares and by 2.8% in August 2019 by purchasing shares from one of the existing shareholders in the company, which makes the current shareholding of Titan in CaratLane 72.3%. Balance equity is held by promoters and employee stock ownership plan holders. |
Key Financial Indicators
Excluding leases |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
^ Gold Metal Loan with sub-limit of Rs 100 crore of Working capital demand loan/Overdraft ^^ Gold Metal Loan entirely fungible with Working capital demand loan |
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||
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Criteria Details
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