Rating Rationale
October 29, 2024 | Mumbai
RBZ Jewellers Limited
Ratings reaffirmed at 'CRISIL BBB/Positive/CRISIL A3+'
 
Rating Action
Total Bank Loan Facilities RatedRs.150 Crore
Long Term RatingCRISIL BBB/Positive (Reaffirmed)
Short Term RatingCRISIL A3+ (Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL BBB/Positive/CRISIL A3+’ ratings on the bank loan facilities of RBZ Jewellers Ltd (RBZ).

 

The ratings continue to reflect expected improvement in the company’s performance as operating revenue during the first quarter of fiscal 2025 has grown to Rs 82.4 crore against Rs 51.3 crore in the corresponding period of fiscal 2024, majorly driven by increase in volume. The operating margin is expected to remain at 11-12% in fiscal 2025. The financial risk profile is expected to remain comfortable with healthy capital structure and comfortable debt protection metrics. Liquidity is also expected to remain comfortable with healthy expected cash accrual against moderate debt obligation and moderately utilised bank limits.

 

The ratings continue to reflect the extensive experience of the promoters in the jewellery industry and healthy financial risk profile of the company. These strengths are partially offset by large working capital requirement and susceptibility of operating profitability to volatility in gold prices, regulatory changes, intense competition and geographical and customer concentration risks.

Analytical Approach

CRISIL Ratings has evaluated the standalone business and financial risk profiles of RBZ.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters: The company is promoted by Mr Rajendrakumar Zaveri and his son, Mr Harit Zaveri. While Mr Rajendrakumar Zaveri has more than three decades of experience, his son has about a decade of experience in the jewellery industry. Expertise of the promoters, their strong understanding of market dynamics and healthy relationships with customers and suppliers should continue to support the business. The company has its own manufacturing set up, resulting in better control over costs and an increase in profit margin. The company supplies products to 72 cities across 19 states in India through job work and the business-to-business (B2B) route. Revenue has increased at compound annual growth rate of 45% for the three fiscals through 2024 to Rs 327.4 crore.

 

  • Healthy financial risk profile: Networth has improved after the Rs 100 crore initial public offering (IPO) in December 2023 to Rs 205.3 crore as on March 31, 2024. This reduced reliance on external borrowing, resulting in strong gearing of 0.34 time and total outside liabilities to adjusted networth (TOLANW) ratio of 0.37 time as on March 31, 2024. Debt protection metrics were also comfortable, with interest coverage ratio of 4.9 times and net cash accrual to total debt ratio of 0.33 time for fiscal 2024.

 

Weaknesses:

  • Large working capital requirement: Gross current assets were more than 282 days as on March 31, 2024, driven by huge inventory of over 283 days. The company has three business segments – business-to-customer (B2C), B2B and job work – of which B2C has the largest working capital requirement. Additionally, the inventory required for job work does not translate into days as only job work charges have been booked as revenue, resulting in high inventory with increase in the job work business. The company also procured large inventory in the last quarter of fiscal 2024 using IPO proceeds, which is expected to result in business growth in the coming quarters. Hence, maintaining a healthy mix of all three segments for controlling the working capital cycle and improving overall operating efficiency will be monitorable.

 

  • Susceptibility of operating profitability to volatility in gold prices, regulatory changes, intense competition and geographical and customer concentration risks: The jewellery industry is highly fragmented, and the consequent intense competition may continue to constrain scalability, pricing power and profitability. Operating performance will remain susceptible to volatility in gold prices and regulatory changes. Moreover, unlike some peers who have a strong presence in the domestic and international markets, RBZ remains a regional player in the B2C category. The company has single-location retail operations and a significant portion of earnings before interest, taxes, depreciation and amortisation comes from the job work segment.

Liquidity: Adequate

Bank limit utilisation was moderate at 49.81% on average for the 12 months ended June 30, 2024. Cash accrual is expected to be Rs 35-45 crore which will be sufficient against term debt obligation of Rs 3-4 crore over the medium term, and the surplus will cushion the liquidity of the company.

 

The current ratio was healthy at 4.61 times as on March 31, 2024. Low gearing and moderate networth support financial flexibility and provides the financial cushion required in case of any adverse conditions or downturn in the business.

Outlook: Positive

The market position of RBZ will continue to be driven by a sharp increase in operating revenue, extensive experience of the promoters and their established relationships with clients.

Rating sensitivity factors

Upward factors:

  • Steady increase in revenue and stable operating margin, leading to cash accrual over Rs 35 crore
  • Improvement in the working capital cycle

 

Downward factors:

  • Further stretch in the working capital cycle impacting the financial risk profile, including liquidity, with TOLANW ratio weakening to above 1.5 times
  • Sharp decline in net cash accrual on account of moderation in revenue or operating profit

About the Company

RBZ was incorporated as a private limited company in 2008 and was reconstituted as a public limited company on February 25, 2023. It is one of the organised manufacturers of gold jewellery in India. It also processes and supplies gold jewellery on job work basis to national retailers. The company operates its retail showroom under the Harit Zaveri brand and has a manufacturing unit at Ahmedabad in Gujarat. Operations are managed by the promoters, Mr Rajendra Zaveri and his son, Mr Harit Zaveri.

Key Financial Indicators

As on / for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

327.43

287.94

Reported profit after tax (PAT)

Rs crore

21.57

22.33

PAT margin

%

6.59

7.76

Adjusted debt/adjusted networth

Times

0.34

1.04

Interest coverage

Times

4.89

4.55

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the
instrument		 Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs. Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Bank Guarantee NA NA NA 5 NA CRISIL A3+
NA Cash Credit NA NA NA 97 NA CRISIL BBB/Positive
NA Proposed Fund-Based Bank Limits NA NA NA 48 NA CRISIL BBB/Positive
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 145.0 CRISIL BBB/Positive 27-06-24 CRISIL BBB/Positive 04-05-23 CRISIL BBB/Stable 06-09-22 CRISIL BBB-/Stable 08-06-21 CRISIL BBB-/Stable Suspended
      -- 21-02-24 CRISIL BBB/Positive   --   --   -- --
Non-Fund Based Facilities ST 5.0 CRISIL A3+ 27-06-24 CRISIL A3+ 04-05-23 CRISIL A3+   --   -- --
      -- 21-02-24 CRISIL A3+   --   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 5 Axis Bank Limited CRISIL A3+
Cash Credit 35.7 IDBI Bank Limited CRISIL BBB/Positive
Cash Credit 36.3 Axis Bank Limited CRISIL BBB/Positive
Cash Credit 25 The Federal Bank Limited CRISIL BBB/Positive
Proposed Fund-Based Bank Limits 48 Not Applicable CRISIL BBB/Positive
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition

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