Rating Rationale

Transcription

Rating Rationale
Rating Rationale
Brickwork Ratings assigns ‘BWR BB’ for the Bank Loan Facilities aggregating ₹
30.00 Cr of Dipti Diamonds & Jewellery Private Limited.
Brickwork Ratings assigns the following Ratings1 for the Fund based Bank Loan Facilities of
Dipti Diamonds & Jewellery Private Limited (DDJPL or the ‘Company’).
Facility
(₹ Cr)
Tenure
Fund Based
FBD/FBE/BRD
Fund Based
PC/PCFC
Rating
20.00
Existing
(3.00)
Long Term
Fund Based
FBD/FBE/BRD
Proposed
BWR BB
(Pronounced BWR Double B)
(Outlook : Stable)
10.00
Total
30.00
(INR Thirty Crores only)
The Rating has, inter alia, factored the experience of promoters in the Diamond business,
established clientele, support of the Dinurje group and financial profile marked by moderate
gearing levels of the Company. The ratings are, however, constrained by inherent risks present
in the diamond and studded jewellery business, working capital intensive nature of operations &
low margins for non-sight holders.
BWR has essentially relied upon the audited financials of Dipti Diamonds & Jewellery Private
Limited up to FY14, projected financials of FY15 and information/clarifications provided by the
Company.
Background:
DDJPL was started as a proprietorship firm, Dipti Diamonds, in 1987. It was started in Mumbai
by Ms.Dina Shah and was reconstituted as a private limited company in 2010. It is in the
business of import of rough diamonds and export of cut & polished diamonds. The Company
belongs to the Dinurje Group which has interests in Diamond & Jewellery trading and has
another company in similar line of business, Dinurje Jewellery Private Limited (DJPL). Over the
years, the Group has developed good network of international clients for their diamonds &
jewellery business.
1
Please refer to www.brickworkratings.com for definition of the Ratings
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The Company procures rough diamonds from Belgium and several other countries. Currently,
the Company trades in small size of diamonds and is planning to trade in medium & large size
diamonds from FY15. The Company outsources the cutting & polishing of diamonds to skilled
labourers in Mumbai and Surat. A large part of the exports of the Company are to Hong Kong
and USA, through their group company – Dinurje Corp.
The Group Company, Dinurje Jewellery Pvt Ltd (DJPL), has been in business of diamond
trading from 1993. DJPL started from diamond trading business and gradually moved into
export of diamond studded jewellery. It has its own designers and manufacturing facilities for its
diamond studded Gold & Silver jewellery.
Management:
Mr. Sudhir Shah and Ms.Dina Shah are the Directors of the Company. They have over 38 years
of experience and have built good network of international clientele. Mr. Pankaj Shah is the
Chief Executive Officer of the Company. The entire shareholding of the Company is with
Ms.Dina Shah and her close relatives.
Bank Facilities:
The Company has availed working capital facilities from Canara Bank. Currently, the Company
has Rs.20 Cr of working capital facilities and has submitted application for enhancement of its
existing limits by Rs.10 Cr. All these credit facilities are in the nature of pre-shipment and postshipment limits required for exports.
Financial Performance:
The Company’s overall operating revenue has witnessed a sizeable increase from Rs.70.87 Cr in
FY13 to Rs.161.12 Cr in FY14, mainly due to increase in orders from its newly acquired clients in
FY13. The operating profits have increased from Rs.2.49 Cr in FY13 to Rs.2.70 Cr in FY14.
However, the Net profit margins have seen a decrease from 0.88% in FY13 to 0.56% in FY14 as
the Company reduced its margins to retain some its newly acquired clients. Tangible net worth
of the Company, not including quasi-equity, has increased to Rs.10.12 Cr in FY14 from Rs.9.21
Cr in FY13, due to retention of profits for FY4.
For FY14, the unsecured loans amounting to ₹1.00 Cr, extended to DDJPL by its promoters and
other related entities were considered as quasi equity. The gearing levels, adjusted for quasiequity, of the company were at 1.30 times in FY14 as against 1.57 times in FY13. The company
has a long working capital cycle as the receivables stretch to almost 6 months, and payables over
4 months. While this is not uncommon in the diamond export segment, it will lock up the bank
limits, and ability to rotate gets affected.
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21 Oct 2014
Rating Outlook:
The outlook is expected to remain stable for the next one year. Ability of the Company to scale
up revenues by diversifying customer base, maintain favorable capital structure, effectively
manage its working capital especially receivables, and improve its profitability margins would be
key rating sensitivities for the Company.
Analyst Contact
Relationship Contact
analyst@brickworkratings.com425-24
bd@brickworkratings.com
Phone
Media Contact
1-860-425-2742
media@brickworkratings.com
Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources,
which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or
completeness of the information obtained. And hence, the information in this report is presented “as is” without any express or implied warranty
of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR
should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses
incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any
reasons.
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