Rating Rationale
September 10, 2019 | Mumbai
Shantivijay Jewels Limited
Rating reassigned 
 
Rating Action
Total Bank Loan Facilities Rated Rs.20 Crore
Short Term Rating CRISIL A4+ (Reassigned)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reassigned its rating 'CRISIL A4+' on the short term bank facility of Shantivijay Jewels Limited (SJ).
 
The rating continues to reflect an established presence in the jewellery manufacturing industry and moderate financial risk profile. These strengths are partially offset by large working capital requirements and exposure to intense competition and susceptibility of operating margins to volatile polished diamond prices.

Analytical Approach

For arriving at its rating, CRISIL has combined the business and financial risk profiles of SJ, its subsidiary, Shantivijay Jewels International Ltd, Mauritius (SJIL) and step down subsidiary, Shantivijay Impex, DMCC (SI), together referred to as the Shantivijay Group. This is because the companies are in the same line of business and are under a common management. While all the group companies are independently carrying on the operations, CRISIL believes that SJ will extend need based support to its subsidiaries.

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:
* Established presence in the jewellery manufacturing industry: The four-decade-long experience of the promoters in the diamond jewelery industry, and their longstanding relationships with customers, have helped the firm to navigate business cycles over the years. The company has established healthy relationship with customers. Benefits from the extensive industry experience of the promoters would continue over the medium term.
 
* Moderate financial risk profile: Healthy net worth and low total outside liabilities to tangible net worth (TOL/TNW) (Rs 48.89 crore and 0.87 times as on March 31, 2019) along with comfortable interest coverage ratio estimated at 2.94 times for fiscal 2019 represents moderate financial risk profile.
 
Weaknesses
* Large working capital requirements: Operations are working capital intensive, as reflected in gross current asset (GCA) of 236 days which emanates from receivable and inventory cycle of 92 days and 138 days as on 31st March 2019.
 
* Exposure to intense competition and susceptibility of operating margins to volatile polished diamond prices: The gems and jewellery industry is highly fragmented because of low entry barriers on account of relatively low capital and technology requirements, attracting numerous un-organised players across the country. The group is also exposed to risks related to volatility in polished diamond prices. Operating profitability although improved in fiscal 2019, has been low between 0.5%-1.5% over the last three fiscals through fiscal 2019.
 
Liquidity: Stretched
SJ has stretched liquidity driven by highly utilized bank limits. SJ has access to fund based limit of Rs 20 crore, utilised at an average of approximately 86% for 12 months ended April 2019. Also, expected cash accruals is around Rs 1.20-1.50 crore in fiscal 2020 and 2021 respectively along with estimated total cash and cash equivalent of Rs 2.97 crore as on March 31, 2019. Current ratio was moderate at 1.81 times as on March 31, 2019. Moreover, the company has minimal long term repayment obligations and no debt funded capex plans over the medium term. CRISIL expects internal accruals and cash and cash equivalent to be sufficient to meet incremental working capital requirement.

Rating Sensitivity Factor
Upward factor:
* Enhancement in bank lines or lower reliance on external debt to meet working capital requirement
* Comfortable debt protection metrics with interest coverage going above 5 times
 
Downward factor:
* Large working capital requirement or large debt-funded capital expenditure
* Decline in operating margin below 0.5% resulting in deterioration of debt protection metrics
About the Group

Set up by Mr. Bimalchand Godha in 1973, Shantivijay Jewels manufactures and exports diamond-studded gold and platinum jewellery. It has a unit in SEEPZ, Mumbai, and a retail showroom in the city. The company operates in the overseas markets through its wholly owned subsidiaries, SJIL and SI.

Key Financial Indicators
Particulars Unit 2019* 2018
Revenue Rs crore 119.41 107.17
Profit after tax (PAT) Rs crore 1.15 -0.09
PAT margins % 1.0 -0.1
Adjusted debt/adjusted net-worth Times 0.35 0.39
Interest coverage Times 2.94 1.37
*provisional

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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)
ISIN Name of Instrument Date of Allotment Coupon
Rate (%) 		Maturity Date Issue  Size
(Rs. Cr) 		Rating Assigned  with Outlook
NA Packing Credit NA NA NA 20 CRISIL A4+

Annexure - List of entities consolidated
Names of Entities Consolidated Extent of Consolidation Rationale for Consolidation
Shantivijay Jewels Limited Full Consolidation Similar line of business with operational synergies
Shantivijay Jewels International Ltd, Mauritius Full Consolidation Similar line of business with operational synergies and wholly owned subsidiary
Shantivijay Impex, DMCC Full Consolidation Similar line of business with operational synergies and wholly owned step down subsidiary
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  20.00  CRISIL A4+  29-07-19  CRISIL BB/Stable  30-04-18  CRISIL A4+  27-01-17  CRISIL A4+  08-01-16  CRISIL A3  CRISIL A3 
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Packing Credit 20 CRISIL A4+ Packing Credit 20 CRISIL BB/Stable
Total 20 -- Total 20 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt
The Rating Process
Understanding CRISILs Ratings and Rating Scales

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