| Renaissance Global Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB+ / Stable / CRISIL A2 '; 'F A- / Stable' assigned to Fixed Deposits; rated amount enhanced for Bank Debt | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ratings on the bank facilities of Renaissance Global Limited (RGL) at ‘CRISIL BBB+/Stable/CRISIL A2‘. CRISIL Ratings has also assigned its ‘FA-/Stable’ rating to RGL’s fixed deposit programme.
CRISIL Ratings had earlier revised its outlook on the long-term bank facilities of RGL to 'Stable' from 'Negative' while reaffirming the rating at 'CRISIL BBB+' and the rating on the short-term bank facilities had been reaffirmed at 'CRISIL A2' vide rating rationale dated 21st June 2021.
The revision in outlook reflected restoration in the business risk profile of the group on the back of better than expected revenue and operating margin which is expected to sustain over the medium term. The group reported revenue of ~Rs 2037 crore in fiscal 2021, much higher than CRISIL’s earlier expectations, despite the economic disruptions following the COVID-19 induced lockdown in Q1 of fiscal 2021. Operating margin of the group sustained at 5.2% for fiscal 2021, post decline operating loss in Q1 of fiscal 2021 caused by reduced scale of operation in Q1 of fiscal 2021. Revival in operating margin was majorly driven by increased scale of operation in Q3 and Q4 of fiscal 2021 and higher contribution from direct to customer segment. With group’s focus on increasing exposure in the direct to customer sales supported by the launch of websites, operating margin will sustain over the medium term.
The upsurge in spending on diamonds jewellery, especially post September 2020, riding on a combination of pent-up demand and recovery in retail offtake in key markets such as the US and China has helped players in gems and jewellery exports to contain the decline in fiscal 2021. Further, uptick in demand is expected to sustain over the medium term with improvement in economic outlook of key geographies. Additionally, restrictions on overseas travel and lower spending on hospitality mean celebrations are largely restricted to spending on gifting, including diamond jewellery. That augurs well for India’s diamond jewellery exports and accordingly for players such as RGL.
The ratings continue to reflect the group’s established market presence backed by the experience of the promoters, focus on increasing presence in the branded jewellery segment and comfortable capital structure. These strengths are partially offset by large working capital requirement and susceptibility to intense competition leading to modest operating profit margin. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of RGL and its subsidiaries, collectively referred to as the Renaissance group, because of their strong business, operational and financial linkages.
Unsecured loan of Rs 3.7 crore as on March 31, 2021, from related entities has been treated as debt due to tendency of withdrawal of such loans.
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: Established market presence backed by the experience of the promoters The extensive experience of the promoters of more than two decades has helped the group establish its position in the international diamond studded jewellery segment. The group is one of the largest exporters of studded jewellery from India, with manufacturing facilities in India and in the UAE. The promoters have longstanding relations with customers and have successfully navigated through several business cycles over the years.
Focus on increasing presence in the branded jewellery segment Renaissance group has acquired US-based Jay Gems, which has a licensing agreement for 'Enchanted by Disney Fine Jewelry' in the US and Canada. The group has entered the Indian retail segment through its IRASVA brand. It recently signed a contract to launch Enchanted Disney Fine Jewelry with Lao Feng Xiang (LFX), the second largest retailer in China. These factors should improve contribution from the branded jewelry segment over the medium term.
Comfortable capital structure Networth was adequate at ~Rs 833 crore as on March 31, 2021, and total outside liabilities to adjusted networth ratio was moderate at ~0.93 times. Healthy accretion to reserves will maintain comfortable capital structure over the medium term.
Weakness: Large working capital requirement Operations have been working capital intensive, with gross current assets (GCA), inventory and receivables estimated at 260 days, 160 days and 68 days, respectively, as on March 31, 2021. Improvement in GCA days with reduction in inventory over the medium term will be key rating sensitivity factor.
Susceptibility to intense competition resulting in modest operating profit margin The gems and jewellery industry is highly fragmented because of low entry barriers on account of relatively low capital and technology requirements, attracting numerous unorganised players across the country. The resultant competition resulted in moderate operating profitability of 5.4-6.5% for the Renaissance group over the five fiscals through 2021. |
Liquidity: Adequate Group has adequate liquidity driven by unencumbered cash and cash equivalents of around Rs. 180 crore as on March 31, 2021. RGL has access to fund based bank lines of Rs 256.5 crore which were utilized to the tune of 76% for 12 months ended April 2021. RGL has also availed additional bank lines of around Rs 49.25 crore under Covid-19 government emergency credit scheme which has supported the liquidity profile of the group. The group has repayment obligations of around Rs 6 crore and Rs 12 crore per annum for fiscal 2022 and fiscal 2023 respectively. Apart from debt repayments, the group has to make payments to promoters of Jay Gems USA of around Rs 24 crore in fiscal 2022 and around Rs 56 crore in fiscal 2023. The capex plans are expected to be funded through internal accruals. CRISIL Ratings believes that going forward RGL's net cash accruals and unutilized bank limits will be sufficient to fund its fixed costs, repayment obligations, capex plans and incremental working capital requirements. |
Outlook Stable CRISIL Ratings believes RGL will continue to benefit from the extensive experience of its promoters and established presence in exports market |
Rating Sensitivity factors Upward factor
Downward factor
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About the Company The Renaissance group manufactures and trades in diamond studded jewellery. It manufactures generic as well as licensed branded jewellery. RGL, the holding company of the group, was incorporated in 1989 as Mayur Gems & Jewellery Exports Pvt Ltd. It was acquired by Mr Niranjan Shah and his family in 1995. It was reconstituted as a public limited company and acquired its present name in 2005. The company is engaged in wholesale manufacturing of jewellery in gold, silver, platinum, studded with polished diamonds, semi-precious and precious stones. RGL has sales subsidiaries in the US, the UK, and the UAE. Facilities are in Mumbai, Bhavnagar (Gujarat), and the UAE. |
Key Financial Indicators (consolidated)
*Provisional |
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)
*not yet issued |
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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Criteria Details
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