Rating Rationale

Key Rating Drivers & Detailed Description

Strengths:

Established market presence backed by experience of promoters: Group has an established market position both in domestic and international markets with brands like Irasva, With Clarity, Everyday Elegance amongst others. Group also has licensed associations with brands like Marvel, Disney, NFL and Star Wars.

This presence across geographies was an outcome from extensive of the promoters spanning over three decades. Promoter experience has also led to longstanding relationships with customers and suppliers and understanding of industry dynamics. Revenue of the group has sustained at Rs 1567 Cr for the nine months ended December 31, 2024 amidst headwinds in the industry on the back of experience of promoters.

Comfortable financial risk profile: Net worth of the group is on improving trajectory and stood at Rs 1369 Cr as on December 31, 2024 which is estimated to increase further as on March 31 2025. Increase in networth driven by issue of shares and accretion to reserves coupled with group’s target to reduce debt is estimated to reduce the gearing levels to sub 0.30 time as on March 31,2025 which stood at 0.47 time as on March 31,2024.

The debt protection metrics of the company are moderate with interest coverage and net cash accruals to adjusted debt 2.97 times and 0.20 time for fiscal 2024. Interest coverage ratio for the nine months ended December 31, 2024 stood over 3.25 times. Sustained improvement in financial risk profile of the company will remain a key monitorable.

Weaknesses:

Susceptibility of operating performance to volatile diamond and gold prices: RGL earns revenue through the sale of diamond studded gold jewellery, making the company exposed to risks related to volatility in both diamond prices and gold prices. Also, high fragmentation in the jewellery industry resulting from low entry barriers on account of relatively low capital and technology requirements attracting numerous unorganized players across the country leads to intense competition and restricts the bargaining power of players.

Furthermore, volatility in gold and diamond prices can not only impact demand but also results in inventory risk. However, inventory risk is partially mitigated by inventory hedging practices followed by the company.

Working capital intensive nature of operations: Operations of the group continue to remain working capital intensive as reflected by Gross Current Asset (GCA) of 275 Days as on March 31, 2024, as against 246 days as on March 31,2023, they are estimated to increase to be at 270-280 days as on March 31,2025.

High GCA days are a result of higher debtor days which stood at 84 days as on March 31, 2024 increased to 102 days as on September 31,2024, increase in debtor days was due to higher sales in Q2 of fiscal 2025. Inventory days also remain high and stood at 182 days as on March 2024. These working capital requirements are financed through creditors and bank lines.