CRISIL has upgraded its rating on the packing credit facility of Dilipkumar V Lakhi (DVL), part of the Lakhi group, to ‘P1’ from ‘P2+’. The upgrade reflects the resilience displayed by the group during the economic downturn as evidenced by better-than-expected revenue growth in 2008-09 (refers to financial year, April 1 to March 31), and in the first nine months of 2009-10. The group also maintained its profitability and large cash accruals in spite of the weak operating environment. Furthermore, the group had resorted to minimal borrowings and maintained strong debt protection indicators over this period. CRISIL believes that the Lakhi group will sustain the growth in its revenues, without increasing its borrowings.

The rating continues to reflect the Lakhi group’s strong operational efficiencies on the back of assured supply of rough diamonds from The Diamond Trading Company (DTC). The ratings also reflect the group’s healthy financial risk profile, marked by large net worth, robust debt protection metrics, and strong financial flexibility. These rating strengths are partially offset by the limitations arising from the partnership form of business in the group’s flagship entities.

For arriving at the rating, CRISIL has combined the business and financial risk profiles of DVL, Vishinda Diamonds (VD), Vishindas Holaram, and Lakhi Gems Impex Pvt Ltd. This is because all these entities, together referred to at the Lakhi group, are in the same line of business, and have operational synergies, intra-group fungible cash flows, and a common set of promoters.

About the Group
The Lakhi group was promoted by Mr. Vishindas Holaram Lakhi in the 1940s to manufacture and export polished diamonds. The group’s flagship companies are DVL, started in 1970 as a proprietorship concern, and VD, a partnership firm, formed in 2000. On April 1, 2008, DVL was converted to a partnership firm. DVL has been a DTC sightholder since 1993. Its manufacturing facility in Surat has nearly 6000 workers. VD is a partnership firm started by the Lakhi family, which was later joined by the Zadaphia family in 2004. The firm owns a manufacturing facility at Surat, and has nearly 2500 workers. The Lakhi group focuses on low-carat diamonds in the range of 1 point (0.01 carat) to 15 points (0.15 carat).