Rating Rationale
January 16, 2025 | Mumbai
Laxmi Jewellery Export Private Limited
Rating reaffirmed at 'Crisil BBB/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.55 Crore
Long Term RatingCrisil BBB/Stable (Reaffirmed)
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 long-term bank facility of Laxmi Jewellery Export Pvt Ltd (LJEPL).

 

The rating continues to reflect the extensive experience of LJEPL’s promoters in the jewellery business, the company’s sound operating efficiency and healthy financial profile. These strengths are partially offset by its exposure to intense competition, the susceptibility of its revenue and profitability to volatility in gold prices, and working capital-intensive operations.

Analytical Approach

For arriving at the rating, Crisil Ratings has considered the standalone business and financial risk profiles of LJEPL.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience and established track record of promoters in the gems and jewelry industry: LJEPL is promoted and managed by various members of the Mehta family. It was started by brothers Mr Vipul Mehta and Mr Bharat Mehta in 1978. As the business grew, other family members joined the business, including Mr Vipul Mehta's son Mr Umang Mehta, and brother Mr Divyesh Mehta. Over the years, the promoters have built good relationships with their customers and suppliers. The promoters have also supported the business in the form of unsecured loans, estimated at Rs 20.48 crore as on March 31, 2024, and expected to remain in the business over the medium term.

 

  • Efficient working capital management: Gross current assets (GCAs) remained moderate at 158 days (including cash and bank balance) as on March 31, 2024. GCAs net off cash and bank balance were at 119 days. The company had order-based inventory and receivables of 49 days and 66 days, respectively, as on March 31, 2024. The working capital cycle is expected to remain stable, with GCAs projected at 120-130 days over the medium term, with largely stable inventory and receivables.

 

  • Healthy financial risk profile: The group capital structure has been healthy due to low reliance on external funds as indicated by gearing of 0.81 time and low total outside liabilities to adjusted networth (TOLANW) ratio of 1.67 times as on March 31, 2024. The debt protection metrics have also been healthy due to low leverage and healthy profitability. The interest coverage and net cash accrual to total debt (NCATD) ratio were at 5.93 times and 0.16 times, respectively, for fiscal 2024, and are expected at similar levels over the medium term.

 

Weaknesses:

  • Exposure to intense competition and susceptibility of revenue and profitability to volatility in gold prices: LJEPL faces intense competition from both large and small players in the jewellery business, resulting in modest operating margin of 3.0-3.2% over the three years through fiscal 2024. The profitability is also susceptible to volatility in gold prices.

 

  • Exposure to regulatory changes: Although India is one of the leading centres for processing, it has very few operational mines for gold and, hence, negligible reserves. The government regulations and policies pertaining to import of gold play an important role in this sector mainly because the industry is dependent on raw material imports. LJEPL, like other jewellery players, will remain susceptible to changing regulatory norms.

Liquidity: Adequate

Bank limit utilisation was low at 27% on average for the 12 months through November 2024. Cash accrual is expected at Rs 16-20 crore which will cushion liquidity amid nil term debt obligation. The current ratio was healthy at 1.71 times and the company had large cash and bank balance of around Rs 72.08 crore on March 31, 2024. The promoters are likely to extend support in the form of equity and unsecured loans to meet working capital requirement and debt obligations.

Outlook: Stable

Crisil Ratings believes LJEPL will continue to benefit from its longstanding business relationships and the experience of management in the jewellery industry.

Rating sensitivity factors

Upward factors:

  • Sustained revenue growth of 20% over the medium term and improvement in the operating margin resulting in cash accrual of more than Rs 25 crore
  • Sustaining comfortable capital structure and other key credit metrics, supported by prudent working capital management.
     

Downward factors:

  • Stagnation in business due to weak demand or stretch in receivables or pile-up of inventory adversely affecting liquidity
  • Accrual lower than Rs 15 crore due to significant weakening of business performance

About the Company

Incorporated in 1978, LJEPL is engaged in wholesaling and retailing of gold and diamond studded jewellery. The company has its manufacturing facilities in Ahmadabad and Mumbai while it owns a retail showroom in Ahmadabad. The company is promoted and managed the Mehta family.

Key Financial Indicators

As on / for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

803.06

925.85

Reported profit after tax (PAT)

Rs crore

16.46

21.86

PAT margin

%

2.05

2.36

Adjusted debt/adjusted networth

Times

0.81

0.45

Interest coverage

Times

5.88

7.68

Status of non cooperation with previous CRA
LJEPL did not cooperate with INFOMERICS Valuation and Ratings Pvt Ltd, which has classified it as noncooperative through release dated July 5, 2024. The reason provided by INFOMERICS Valuation and Ratings Pvt Ltd is non-furnishing of information for monitoring of the rating.

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
Crisil Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs. Crore) Complexity Levels Rating Outstanding with Outlook
NA Cash Credit NA NA NA 55.00 NA Crisil BBB/Stable
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 55.0 Crisil BBB/Stable   --   -- 27-10-23 Crisil BBB/Stable   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 55 YES Bank Limited Crisil BBB/Stable
Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies

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