| M Suresh Company Private Limited | ||||||
| Rated amount enhanced | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings' ratings on the bank facilities of M Suresh Company Private Limited (MSCPL; part of M Suresh Group) continues to reflect the well established market presence backed by experience of the partners, healthy operating efficiencies and diversified revenue profile along with comfortable financial risk profile. These rating strengths are partially offset by large working capital requirements along with susceptibility to volatile diamond prices amidst intense competition resulting in moderate operating profit margins. |
Analytical Approach Consolidated CRISIL Ratings has consolidated the business and financial risk profiles of MSCPL, Adinath Jewellery Exports (AJE), and MSJPL Jewellery Private Limited (MSJPL) together referred to as M Suresh Group (MSG). This is because all these entities, have common promoters, and there are operational and financial linkages between these entities.
Unsecured Loans Unsecured loans to the tune of Rs. 16.12 crores as on March 31, 2021 have been treated as debt as the promoters have exhibited a tendency of withdrawing the unsecured loans infused by them.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Established market presence backed by experience of promoters Supported by extensive experience of the partners, MSG has established its position in domestic and international cut and polished diamond markets for more than five decades. The group is a family-run business and the promoters have maintained longstanding relations with customers while successfully navigating through several business cycles over the years. The firm's diversified customer base enables high bargaining power with its customers, and deep insights into consumer buying patterns; thus the firm can identify emerging market trends early. It operates in USA, Belgium, Hong Kong, UAE, Israel, India, etc. and derives around 80% of the revenue from exports.
Healthy operational efficiencies and diversified revenue profile The group has been a DTC (rough diamond sales and distribution arm of the De Beers group of companies) sight holder through M Suresh Company P Limited since 1993 and also awarded sight holder status with Alrosa through its associate concern M. Suresh Vladivostok LLC and M Suresh DMCC from fiscal 2020 which enables it to source, process and distribute diamonds consistently in volume and variety. Close proximity to the diamond trading market has enabled the firm to receive its required supply of high quality rough diamonds during the times of supply disruptions leading to production efficiency. The group has a diversified revenue profile as seen by its diversified geographical and product profile over the years.
Comfortable financial risk profile Networth has been adequate is at Rs 502 crore as on March 31, 2021, with moderate total outside liabilities to tangible net worth ratio (TOLTNW) at 1.2 times. Networth is estimated to be around Rs. 538 crore and TOLTNW ratio around 1.17 times at the end of fiscal 2022. The debt protection metrics are comfortable with interest coverage and net cash accrual to adjusted debt ratios estimated at 4 times and 0.08 time, respectively, in fiscal 2022. Debt protection metrics is expected to remain comfortable over the medium term.
Weaknesses: Large working capital requirements Operations have been working capital intensive, with Gross Current Asset days of 251 days led by inventory, and receivables are at around 89 days and 136 days, respectively, as on March 31, 2021. Gross current assets is estimated to have improved to around 190 days in fiscal 2022 driven by inventory of 60 days and debtors of 110 days. It is expected to stabilize around 200-210 days over the medium term.
Susceptibility to volatile diamond prices amidst intense competition resulting in moderate operating profit margins The diamond industry is highly fragmented because of low entry barriers on account of relatively low capital and technology requirements, attracting numerous un-organised players across the country. JG is also exposed to risks related to volatility in diamond prices. The firm maintains inventory of polished diamonds which makes the firm vulnerable to fluctuation in diamond prices and with relatively limited value addition operating profitability has been moderate at around 1.7% to 3.7% over the last three fiscals through 2022.
The Russia-Ukraine confrontation may have impact for diamond polishers as continued disruption of trade can make roughs costlier, leading to a squeeze on their margins. Alrosa, Russia’s largest diamond miner, accounts for ~30% of the global production of roughs, the prices of which had surged 21% in 2021. The on-going Russia-Ukraine war and Russia being an important exporter of the rough diamonds globally, the prices of roughs could see a rise and hence the sustainability of healthy operating margin going ahead will remain a key rating sensitivity. |
Liquidity: Adequate Bank limit utilisation is moderate at around 74 percent for the past twelve months ended Jan 2022. Cash accrual are expected to be over Rs 33 crore which are sufficient against term debt obligation of Rs 2.3 crore over the medium term. In addition, it will act as cushion to the liquidity of the company. Current ratio is healthy at 1.72 times on March 31, 2021 The liquidity is also supported by unsecured loans extended by the promoters and their family members to the tune of Rs 16.1 crore as on March 31, 2021. Timely funding support from promoter is expected to continue over the medium term. |
Outlook: Stable CRISIL Ratings believes M Suresh Group will continue to benefit from the extensive experience of its promoters. |
Rating Sensitivity Factors Upward factor
Downward factor
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About the Group MSG., incorporated in 1968, cuts and polishes diamonds. It also trades in diamonds, and has been a DTC sightholder for two decades and also obtained Alrosa sight from Fiscal 2020. MSJ exports diamond-studded jewellery and has a manufacturing unit in the Santacruz Electronics Export Processing Zone (SEEPZ) in Mumbai. Adinath, a partnership firm which commenced operations in 2009, also exports diamond-studded jewellery. |
Key Financial Indicators: Combined
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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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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 Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 09-Jun-2022 in line with the lender-wise facility details as on 01-Mar-2022 received from the rated entity.
Criteria Details
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