Detailed Rationale CRISIL Ratings’s rating on the long-term bank loan facilities of Manappuram Jewellers Limited (MJL) continues to reflect MJL's established presence in the gold jewellery industry and average financial risk profile. These strengths are partially offset by the susceptibility of operating profitability to volatility in gold prices, regulatory changes, and intense competition in the industry and working capital intensive operations. |
Key Rating Drivers & Detailed Description Strengths: * Established presence in the gold retail jewellery: MJL benefits from its established presence and promoters' extensive experience in the gold jewellery industry. Mr. V.P. Nandakumar and his family have been in the jewellery industry for close to six decades. The company is part of the Manappuram group, with Flagship Company being Manappuram Finance Limited, incorporated in July 1992. The promoter set up MJL in 2008 to foray into jewellery retailing. MJL currently operates 6 showrooms for jewellery retail across Andhra Pradesh, Kerala, and Karnataka. The company’s manufacturing segment has been growing at a healthy rate over the last 2 years and it is expected to continue as the company has plans to venture into new geographies. CRISIL believes that MJL will continue to benefit over the medium term from extensive experience of company's management in the gold jewellery industry. Company had a net worth of about Rs. 98 crores as on March 31, 2021 and is estimated to grow by Rs 6-8 crores annually. Its capital structure has remained healthy marked by gearing of 1.52 times as on March 31, 2021. While interest coverage improved marginally over the last 2 years on account of improvement in operating profitability, it still remains average at about 1.82 times in fiscal 2021 on account of increased debt levels following spike in gold price over the last 1 year.
Weakness: * Susceptibility of the company's operating profitability to volatility in gold prices, regulatory changes, and intense competition in the gold jewellery industry: MJL's revenue and profitability are susceptible to intense competition in the jewellery industry and to volatility in raw material prices. Gold Jewellery business is marked by presence of large number of players and the competitive intensity amongst them is high. High competitive intensity limits the profitability margins of these players. CRISIL believes that MJL's operating performance will remain susceptible to volatility in gold prices, regulatory changes, and intense competition in the gold jewellery industry.
* Large working capital requirement: MJL derives more than 80% of its revenue from retail segment where inventory holding is for about 170 days. Large inventory, coupled with moderate operating profitability led to average return on capital employed (ROCE) of less than 10% in fiscal 2021. |
Liquidity: Adequate Liquidity is adequate. Bank limit utilisation is moderate at around 83 percent for the past twelve months ended April 2021. Cash accrual are expected to be in the range of Rs 8-10 crores over the medium term which is sufficient against term debt obligation of about Rs 5-7 crores. In addition, Promoter’s need-based fund support continues to aid the liquidity of the company. |
Outlook: Stable CRISIL Ratings believes MJL will continue to benefit from extensive industry experience of its promoters. |
Rating Sensitivity Factors Upward factors:
Downward factors:
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About the Company Thissur-based Manappuram Jewellers Ltd (MJL) was set up in 2008 and is engaged in retailing and manufacturing of gold jewellery. Part of the Manappuram group, its daily operations are managed by promoters Mr. V P Nandakumar and his wife Mrs. Sushma Nandakumar. |
Key Financial Indicators
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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 - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||
| Facility | Amount (Rs.Crore) | Rating |
| Cash Credit | 5 | CRISIL BBB-/Stable |
| Cash Credit | 15 | CRISIL BBB-/Stable |
| Cash Credit | 5 | CRISIL BBB-/Stable |
| Cash Credit | 5 | CRISIL BBB-/Stable |
| Cash Credit | 28 | CRISIL BBB-/Stable |
| Cash Credit | 5 | CRISIL BBB-/Stable |
| Cash Credit | 1 | CRISIL BBB-/Stable |
| Cash Credit | 20 | CRISIL BBB-/Stable |
| Drop Line Overdraft Facility | 15 | CRISIL BBB-/Stable |
| Working Capital Demand Loan | 20 | CRISIL BBB-/Stable |
Criteria Details
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