| Annai Jewellers Private Limited | ||||
| Rating reaffirmed at 'Crisil BBB/Stable'; Rated amount enhanced for Bank Debt | ||||
| Rating Action | ||||
| ||||
| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has reaffirmed its ‘Crisil BBB/Stable’ rating on the bank facilities of Annai Jewellers Private Limited (AJPL).
The rating reflects AJPL's extensive industry experience of the promoters, and healthy financial risk profile. These strengths are partially offset by its susceptibility of revenue and profitability to intense competition in a fragmented industry, geographical concentration risk, and vulnerability to volatility in gold prices. |
Analytical Approach Crisil Ratings has evaluated the standalone business and financial risk profiles of AJPL. Unsecured loan of Rs 62.84 crore as on March 31, 2024, from the directors has been treated as 75% equity and 25% debt. This is because the loan is subordinate to bank debt and likely to be retained in the business over the medium term, and carry interest rate of less than market rate. |
Key Rating Drivers & Detailed Description Strengths: Extensive industry experience of the promoters: The promoters’ extensive experience of over three decades in the jewellery business gives the management deep insight into the consumer-buying pattern and helps them to identify trends in jewellery designs. This has enabled them to develop a good brand presence and develop a strong customer base. The long and established presence also instills an element of trust among the consumers, which is an important factor influencing jewellery-buying decisions.
Healthy Financial risk profile: AJPL capital structure was healthy as indicated by networth of around Rs 99.85 Crores and gearing and total outside liabilities to adj tangible net worth (TOL/ANW) of 0.32 times and 1.11 times respectively for year ending on 31st March 2024. AJPL debt protection measures have also been at a healthy level due to leverage and healthy profitability. The interest coverage and net cash accrual to total debt (NCATD) ratio are at 5.83 times and 0.68 times for fiscal 2024. AJPL debt protection measures are expected to remain at a similar level over the medium term.
Weakness: Susceptibility of revenue and profitability to intense competition in a fragmented industry and geographical concentration risk: The gold jewelry industry is highly fragmented due to the presence of a large number of small and big players, which constrains profitability. The industry players have to continuously offer new designs and adopt innovative marketing practices to attract and retain customers. Sustenance of demand along with operating margin to remain monitorable.
Although the entity has been in the retail jewellery business for three decades, all its stores are in Tamil Nadu. Gold buying is a localised activity, and it's accrual depends on the level of economic activity in the region. The geographical concentration in operations exposes it to volatility in demand because of local factors and modest margins
Vulnerability to volatility in gold prices: The fluctuation in gold prices kept operating margins in the range of 5.40-9.10% during the past three years through fiscal 2024. Any sharp increase in gold prices can impact the profitability of AJPL. Crisil Ratings believes that volatility in gold prices will continue to impact the demand-supply scenario. |
Liquidity: Adequate Bank limit utilisation is moderate at around 83 percent for the past six months ended November 2024. Cash accrual are expected to be over Rs 20 crore which are sufficient against term debt obligation of Rs 2-3 crore over the medium term. In addition, it will be act as cushion to the liquidity of the company.
Current ratio are healthy at 2.15 times on March 31, 2024. The promoters are likely to extend support in the form of equity and unsecured loans to meet its working capital requirements and repayment obligations. Low gearing and moderate net worth support its financial flexibility, and provides the financial cushion available in case of any adverse conditions or downturn in the business. |
Outlook: Stable Crisil Ratings believes AJPL will continue to benefit over the medium term from its longstanding relationships with principals and experience of the management to mitigate the inherent risk in trading business |
Rating Sensitivity Factors Upward factor
Downward factors
|
About the Company AJPL was incorporated in 2020. It took over the operations of “Annai Jewellers”, a Tamil Nadu based partnership firm. It is engaged in retailing of jewellery through its 5 showrooms which are located in Kovilpatti, Rajapalayam, Thoothukudi, Tenkasi and Chennai (Tamil Nadu) under the name 'Annai Jewellers'. It also has 10 Saving centers in Pudukottai, Puthiamputhur, Vilathikulam, Sayalgudi, Sivakasi, Srivaigundam, Eral, Sivagiri, Tiruchendur and Keela Eral. The day-to-day operations of the firm are managed by second generation businessmen, the partners, Mr. P. Vinayakamoorthy, Mr. P. Muruganantham and Mr. P. Selvaraj. |
Key Financial Indicators
|
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||
|
Criteria Details
|