Rating Rationale

Key Rating Drivers & Detailed Description

Strengths:

Established market presence backed by experience of promoters:

The group has a market presence of over 3 decades and is supported by extensive experience of the partners and their understanding of industry dynamics. The group enjoys an established market position in domestic and international diamond markets. Over the years the promoters have maintained longstanding relations with customers while successfully navigating through several business cycles.

Due to established market presence, the company has been able to develop many brands like IRASVA, Jewelili and Everyday Elegance. It also has licensed associations with Hallmark Diamonds, Disney Jewells, Star Wars and True Fans under which it makes jewellery inspired by these brands. Established brands catering directly to consumers has been supporting operating margin of the group.

Comfortable Financial Risk Profile:

Group has a comfortable capital structure with healthy networth of Rs 981 Cr as on March 31,2023. Low reliance on external debt has led to a moderate Total outside liabilities to adjusted networth ratio of 0.88 times as on March 31,2023. The debt protection metrics of the group are also comfortable with interest coverage over 3.45 times and net cash accruals to adjusted debt at 0.25 times for fiscal 2023. In the absence of debt funded capex, financial risk profile is expected to remain comfortable over the medium term.

Weakness:

Susceptibility to volatile diamond prices amidst intense competition resulting in moderate operating profit margins:

85%-90% of the revenue earned by group is through the sale of diamond jewellery, making the company exposed to risks related to volatility in diamond prices. Also, high fragmentation in the diamond industry resulting from low entry barriers on account of relatively low capital and technology requirements attracting numerous un-organized players across the country leads to intense competition. The operating margins of the group have ranged between 5.15%-8.49% over the last five fiscals through fiscal 2023.

Working capital intensive operations:

Although on an improving trend the operations of the group continue to remain working capital-intensive emanating from high inventory and debtor days at 152 days and 73 days as on March 31,2023. The group’s gross current assets have remained in range of 245-270days over past three years through March 31, 2023.