| J.C. Brothers Retail Private Limited | ||||
| Rating reaffirmed at 'CRISIL BBB+ '; outlook revised to 'Stable' | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its rating outlook on the long-term bank facilities of J.C. Brothers Retail Private Limited-JCBR (part of JC Brothers group) to 'Stable' from ' Negative'; while reaffirming the ratings at 'CRISIL BBB+'.
The outlook revision reflects the operations reverting to normalcy with majority of the showrooms indicating return to precovid sales from October 2020. New showrooms opened in Tier-2 Cities have contributed to lowering the impact on fall in group revenues which is expected to in the range of 10-12%.Moreover, the above-average financial risk profile is expected to be sustained, while short-term liquidity should remain adequate. Fast reversal to normalcy following the Covid-19 pandemic should help maintain the business risk profile.
The rating continues to reflect JC Brothers Group promoter’s extensive experience, established market position of JC Brothers and The Chennai Shopping Mall formats in Textile and Jewellery retail in Hyderabad coupled with its above-average financial risk profile. These rating strengths are partially offset by its moderate working capital intensive nature of operations and exposure to intense competition in a fragmented segment. |
Analytical Approach For arriving at the rating, CRISIL Ratings has combined the business and financial risk profiles of JC Brothers Retail Private Limited, J. C. Brothers Jewelers and The Chennai Shopping Mall – Jewelers. This is because these companies, together referred to as the JC Brothers group, have a common management team, are in similar lines of business, and have operational linkages and fungible cash flows.
Please refer Annexure - Details of Consolidation, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Promoter’s experience and established regional presence: JC Brothers group will benefit from the promoters’ more than two decades’ industry experience and strong reputation in Hyderabad. This experience has led an expertise in selecting outlet locations, range of products and in merchandising and brand building which in turn enabled the group to maintain a strong revenue growth. Moreover, over the years he has built strong supplier relationships and has positioned himself in various segments through the niche offering of every brand.
Established market position of JC Brothers and The Chennai Shopping Mall formats in Textile and Jewellery retail in Hyderabad: The group first started with JC Brothers brand showrooms which catered to lower middle-class, middle class customers who are price and quality conscious . With changes in customer preferences and their aspirations the group has come out with a new brand of showrooms called The Chennai Shopping Mall (CSM). These showrooms are marketed as one-stop solutions for all shopping needs for middle class and upper middle-class customers.
Above-average financial risk profile:The group has comfortable financial risk profile marked by comfortable gearing and above-average debt protection metrics. Net worth was Rs. 139 Cr as on March 31, 2020. The TOL/TNW was moderately high at 2.2 times as on March 31, 2020 and the gearing on the same date stood at 0.9 times. The interest coverage and NCATD were at 2.9 times and 21% for fiscal 2020.
Weakness: Exposure to intense competition in a fragmented segment: There is intense competition in the retail sector with several unorganized players a few large national level players. In its key markets of Telangana, AP, Karnataka and TN, the company faces intense competition from RS Brothers Group, Chandana Group, Kalamandir Group.
Working capital intensive nature of operations: The retail industry is inherently working capital intensive. The group’s working capital requirements are intensive with its gross current assets at 115 days as on March 31, 2020. Its working capital cycle is characterized mainly by high inventory days of 103 days as on March 31, 2020 largely driven by Gold inventory. The group gets supplies against a credit period of 30-40 days. |
Liquidity Adequate Liquidity is adequate with group likely to generate cash accrual of over Rs 30-35 crore over the medium term against debt obligation of Rs 14 crore. Despite working capital intensive operations, average bank limit utilization remains moderate at 62 % for the past 12 months ending December 2020. |
Outlook Stable CRISIL Ratings believes that JC Brothers group business risk profile is likely to improve over the medium term driven by sustenance of its steady revenue growth, while improving its profitability margins. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Group J.C. Brothers Retail Private Limited (JCBRPL) Corner) was set up as a partnership firm in 2004 by Mr. Marri Janardhan Reddy and family members; it was reconstituted as a private limited company in July 2008. J. C. Brothers Jewelers (JCBJ) is a part of the JC Group, established in the year 2004 as a partnership firm by Mr Marri Janardhan Reddy and his family members. JCBJ is engaged in retail jewelry. Chennai Shopping Mall – Jewelers (CSMJ), a registered partnership firm promoted by the same promoters in year 2009 and is engaged in retail jewelry. |
Key Financial Indicators: Consolidated
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||
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