| Renaissance Global Limited | ||||||
| Rating outlook revised to 'Positive'; Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its outlook on the long term bank facilities of Renaissance Global Limited (RGL; Part of Renaissance Group) to ‘Positive’ from ‘Stable’ and has reaffirmed the rating at ‘CRISIL BBB+’. The short term rating has been reaffirmed at ‘CRISIL A2’
The outlook revision reflects expectation of sustained improvement in business risk profile over the medium term. Group’s operating performance improved in fiscal 2022. The group’s revenue grew at healthy rate of ~33% in fiscal 2022 against previous fiscal and has registered revenue of ~Rs. 2,208.7 crores. Growth in revenue was driven by increased volumes and improved price realisations in spite of change in accounting policy for revenue recognition. Further, operating margins of the group improved from ~5.2% in FY21 to 9.1% in FY22 (~2.1% improvement was on account of base change). The improvement in margins is led by improved sales mix with focus on high margin branded jewellery business. Consequently, financial risk profile and liquidity has also improved with net cash accruals of over Rs 140 crore in fiscal 2022. Inventory days have also been improved on like to like basis from 160 days in FY21 to 131 days in FY22. Sustenance of improved operating performance while maintaining higher proportion of sales in branded jewellery segment to remain rating sensitivity factor.
The ratings continue to reflect the group’s focus on increasing presence in the branded jewellery segment, established market presence backed by the experience of the promoters, and comfortable financial risk profile. These strengths are partially offset by susceptibility to intense competition susceptibility to regulatory changes and working capital intensive operations. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of RGL and its subsidiaries, collectively referred to as the Renaissance group, because of their strong business, operational and financial linkages.
Unsecured loan of Rs 3.7 crore as on March 31, 2021, from related entities has been treated as debt due to tendency of withdrawal of such loans.
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: Focus on increasing presence in the branded jewellery segment Renaissance group has been continuously expanding in the high margin branded jewellery segment. Group had acquired US-based Jay Gems, which has a licensing agreement for 'Enchanted by Disney Fine Jewelry' in the US and Canada. The group has entered the Indian retail segment through its IRASVA brand. And, also the group had recently entered into strategic licensing partnership with National Football League (NFL). Increased branded jewellery business is expected to improve its operating margins over medium term.
Established market presence backed by the experience of the promoters The group is one of the largest exporters of studded jewellery from India, with manufacturing facilities in India and in the UAE. The extensive experience of the promoters of more than two decades has helped the group establish its position in the international diamond studded jewellery segment. The promoters have longstanding relations with customers and have successfully navigated through several business cycles over the years.
Comfortable financial risk profile Group is having healthy networth of around Rs 1034 crore as on March 31, 2022. Gearing and total outside liabilities to adjusted networth (TOLANW) ratio of 0.6 time and 1.2 times, respectively, as on March 31, 2022. Debt protection metrics were comfortable, reflected in interest coverage and net cash accruals to adjusted debt of 6.7 times and ~0.2 times for fiscal 2022 and is expected to remain comfortable over medium term. Healthy accretion to reserves will maintain comfortable financial risk profile over the medium term.
Weakness: Susceptibility to intense competition The gems and jewellery 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. However, this risk is partly migrated by group’s established presence in branded segment. The group maintains inventory of polished diamonds, which makes it susceptible to fluctuations in diamond prices. Impact of volatility in raw material prices as well as revenue mix on the operating margin remains a key monitorable.
Susceptibility to regulatory changes: The Gems and jewellery industry is susceptible to regulatory changes by the government. Any unfavorable regulatory change may impact the revenue or margins of the group.
Working capital intensive operations Operations have been working capital intensive, with gross current assets (GCA), inventory and receivables at 277 days, 171 days and 75 days, respectively, as on March 31, 2022. Although inventory levels have moderated, operations are expected to remain working capital intensive over medium term. |
Liquidity: Adequate Group has adequate liquidity driven by unencumbered cash and cash equivalents of around Rs. 181 crore as on March 31, 2022. RGL has access to fund based bank lines of Rs 256.5 crore which were utilized to the tune of 77% for 12 months ended April 2022. Net cash accrual, expected at more than Rs 125 crore per fiscal in fiscals 2023 and 2024 against NIL term debt obligation in FY23 and Rs. 12.5 crores in FY24. Apart from debt repayments, the group has to make payments to promoters of Jay Gems USA of around Rs 56 crore in fiscal 2023, out of which Rs. 28 crores has already been paid. Group is having no major capex plan over medium term. CRISIL Ratings believes that going forward RGL's net cash accruals and unutilized bank limits will be sufficient to fund its fixed costs, repayment obligations, capex plans and incremental working capital requirements |
Outlook: Positive CRISIL Ratings believes RGL will continue to benefit from the extensive experience of its promoters and established presence in exports market along with increasing contribution from the branded jewellery segment |
Rating Sensitivity Factors Upward factor
Downward factor
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About the Group The Renaissance group manufactures and trades in diamond studded jewellery. It manufactures generic as well as licensed branded jewellery. RGL, the holding company of the group, was incorporated in 1989 as Mayur Gems & Jewellery Exports Pvt Ltd. It was acquired by Mr Niranjan Shah and his family in 1995. It was reconstituted as a public limited company and acquired its present name in 2005. The company is engaged in wholesale manufacturing of jewellery in gold, silver, platinum, studded with polished diamonds, semi-precious and precious stones. RGL has sales subsidiaries in the US, the UK, and the UAE. Facilities are in Mumbai, Bhavnagar (Gujarat), and the UAE. |
Key Financial Indicators
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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)
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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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This Annexure has been updated on 29-Jul-2022 in line with the lender-wise facility details as on 28-Apr-2022 received from the rated entity.
Criteria Details
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