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CRISIL’s rating on the bank facilities of P & S Jewellery Ltd (PSJL, part of the P&S group) continues to reflect the P&S group’s subdued financial risk profile, marked by high gearing, and exposure to intense competition in the jewellery industry. These rating weaknesses are partially offset by the benefits that the group derives from its promoters’ experience in the jewellery industry, and its established relationships with its customers. For arriving at its rating, CRISIL has combined the business and financial risk profiles of PSJL and P&S Shringar Pvt Ltd (PSSPL), as the two entities, together referred to as the P&S group, are under a common management and in the same line of business, and have fungible cash flows between them.
Update
The P&S group achieved revenues of Rs.3.95 billion in 2009-10 (refers to financial year, April 1 to March 31), significantly higher than its revenues of Rs.2.03 billion in 2008-09. Also, in 2010-11, the group’s revenues are estimated at Rs.6.5 billion, which translates into a growth of around 65 per cent over the revenues in the previous year, partly driven by the increase in gold prices. This sharp growth in sales has resulted in a significant increase in working capital requirements, which are being primarily funded by contracting larger bank debt, which resulted in a higher gearing in 2010-11, as compared to 2009-10. The gearing as on March 31, 2011, is estimated at more than 3 times as compared to 1.92 times as on March 31, 2009. CRISIL believes that the P&S group will maintain a stable business risk profile over the medium term, even as its capital structure will remain leveraged led by high incremental working capital requirements.
About the Group
The P&S group, set up in 1992 by Mr. Chhabildas Shah and Mr. Paresh Shah, manufactures diamond-studded gold jewellery. The group’s entities, PSJL and PSSPL, cater primarily to the export and domestic markets, respectively. PSSPL, set up in 2008, has its manufacturing unit in Mumbai (Maharashtra), while PSJL, set up in 1992, has its export-oriented unit at Surat (Gujarat).
PSJL reported a profit after tax (PAT) of Rs.78.8 million on net sales of Rs.2.65 billion for 2009-10, against a PAT of Rs.11.6 million on net sales of Rs.1.54 billion for 2007-08.
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About CRISIL Limited
CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.
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Last updated: March 31, 2011
Disclaimer: A CRISIL rating reflects CRISIL's current opinion on the likelihood of timely payment of the obligations under the rated instrument and does not constitute an audit of the rated entity by CRISIL. CRISIL ratings are based on information provided by the issuer or obtained by CRISIL from sources it considers reliable. CRISIL does not guarantee the completeness or accuracy of the information on which the rating is based. A CRISIL rating is not a recommendation to buy, sell, or hold the rated instrument; it does not comment on the market price or suitability for a particular investor. All CRISIL ratings are under surveillance. Ratings are revised as and when circumstances so warrant. CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this product. CRISIL Ratings’ rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For the latest rating information on any instrument of any company rated by CRISIL, please contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (+91 22) 3342 3000.
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