CRISIL has assigned its ‘B/Stable/P4’ ratings to the bank facilities of Leela Gold Design Ltd (LGDL). The ratings reflect LGDL’s weak financial risk profile because of losses incurred in recent years, its small scale of operations, presence in low-margin segments, and low net worth. These weaknesses are partially offset by the benefits that LGDL derives from its promoter’s experience in the gold jewellery industry.

Outlook: Stable
CRISIL believes that LGDL will continue to benefit from its promoter’s experience in the gold jewellery business and maintain its low debt level. However, the volatility in the company’s profitability and the low value addition in its business operations will remain key rating sensitivity factors over the medium term. The outlook may be revised to ‘Positive’ if the company stabilises its profitability. Conversely, the outlook may be revised to ‘Negative’ if the company’s profitability and/or capital structure deteriorates because of further losses in the business and higher-than-expected debt levels respectively.

About the Company
Set up in 2003 by Mr. Parasmal Sancheti, LGDL manufactures gold chains and trades in gold bullion. LGDL manufactures both machine-made and hand-made gold chains, with a higher proportion (about 70 per cent) of machine-made gold chains. Its total installed capacity for manufacturing machine-made gold chains was 3600 kilograms (kg) per annum as on December 31, 2009. LGDL also undertakes job-work for third parties. LGDL has a gold loan facility of 40 kg from Bank of Nova Scotia for procuring 24-carat gold, against a letter of credit of Rs.70 million.

LGDL reported net loss of Rs.2.1 million on net sales of Rs.284 million for 2008-09 (refers to financial year, April 1 to March 31), against a profit after tax of Rs.8.4 million on net sales of Rs.292 million for 2007-08.