July 30, 2019

Anand Jewels (Indore) Private Limited: Ratings reaffirmed; rated amount enhanced

Summary of rating action

Previous Rated Amount Current Rated Amount
Instrument* Rating Action
(Rs. crore) (Rs. crore)
Long-term: Fund based 37.5 37.5 [ICRA]BBB- (Stable); reaffirmed
Long-term/Short-term:
42.5 52.5 [ICRA]BBB- (Stable)/A3; reaffirmed
Non-fund Based
Total 80.0 90.0
* Instrument details are provided in Annexure 1

Rationale
ICRA’s ratings continue to favourably factor in Anand Jewels (Indore) Private Limited’s (AJIPL) gradually strengthening
position as a regional player in Indore, Madhya Pradesh, as evident from its healthy revenue growth in FY2019. The
extensive experience of the promoters of more than two decades in retail jewellery industry is a positive. The ratings also
factor in the company’s comfortable working capital intensity and liquidity profile aided by the presence of sizeable
metal loans providing cushion from price variation risk. The ratings, however, remain constrained by the limited track
record of the company, relatively modest scale and geographical-concentration risk as it derives revenues from a single
store. Further, ICRA takes note of the recent increase in gold prices and the rise in import duty on gold, resulting in weak
consumer demand. Going forward, the company’s ability to increase its scale of operations through geographic
diversification, improve its return metrics and maintain its liquidity position would be the key rating sensitivity.

Outlook: Stable

ICRA takes note of the extensive experience of the promoters in the retail jewellery industry. The outlook may be revised
to Positive if the company continues to achieve significant improvement in its top line along with better profitability and
liquidity position. The outlook may be revised to Negative if the company faces a decline in the scale and profitability
levels, or elongation in working capital cycle, which weakens debt coverage and liquidity.

Credit strengths
• Extensive experience of promoters: The promoters have extensive experience in the jewellery retail business in
Indore. AJIPL’s Chairman Mr. Harbhajan Anand has more than five decades of experience in the retail jewellery
business, while Mr. Gaurav Anand, the other director, has more than two decades of experience.

• Increasing brand presence with improving top line: The company has been promoting its products through various
verticals and hence has a good brand presence in Indore. Its top line also grew 15.8% in FY2019 to Rs. 303.3 crore,
primarily due to higher targeting and penetrating the lower per capita income group through an expanded product
portfolio.

• Availability of metal loan provides cushion from price variability: The availability of metal loan as a source of the
majority of funding provides cushion for the company against any price variations. This apart, as metal loans are
available at cheaper interest rates, its overall interest burden also reduces.

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Credit challenges
• High geographical-concentration risk with one store in Indore: High geographical-concentration risk prevails for the
company as it has only one store in Indore. Despite a modest year-on-year increase in top line, the same remains
moderate compared to competitor brands in the country.

• Improving but modest coverage indicators: The debt coverage indicators of the company have improved but remain
moderate with total debt/operating profit ratio of 4 times in FY2019 against 6.3 times in FY2018. The interest
coverage also remained moderate but improved to 3.4 times in FY2019 from 3.1 times in FY2018.

• Exposure to global pricing variations, Government policies and weak market sentiment: The dependence of gold
price on global market scenarios continues to be critical as it remains volatile. This coupled with adverse
Government policies and weak consumer demand across industries might impact the overall demand of gold.

Liquidity position
The liquidity position remained comfortable with working capital limit utilisation at ~61% in the last 12-month period,
ending March 2019, further aided by free cash of Rs. 1.3 crore and Rs. 3.6 crore of unsecured loans from the promoters.
As on March 31, 2019, the current ratio stood at 1.4 times.

Analytical approach
Analytical Approach Comments
Corporate Credit Rating Methodology
Applicable Rating Methodologies
Gold Jewellery Retail Industry
Parent/Group Support Not applicable
Consolidation / Standalone Standalone

About the company

AJIPL was established in 2008 by Mr. Gaurav Anand. It manufactures and sells gold ornaments, jewellery, precious stones
and diamonds under the name Anand Jewels at M.G Road, Indore. The company’s Chairman Mr. Harbhajan Anand has
50 years of experience and Mr. Gaurav Anand, one of the director of the firm, has 20 years of experience in the field of
retail jewellery. The Anand family or Anand Corporation is a well-known business group in Madhya Pradesh, with major
businesses in retail (automobile and jewellery), hospitality and real estate. At present, AJIPL has only one showroom at
M. G. Road, a prime location of Indore.

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Key financial indicators (Audited)
FY2018 FY2019
Operating Income (Rs. crore) 262.0 303.3
PAT (Rs. crore) 5.4 7.5
OPBDIT/ OI (%) 4.4% 5.1%
RoCE (%) 12.4% 14.4%

Total Debt/ TNW (times) 2.2 1.5

Total Debt/OPBDIT (times) 6.3 4.0
Interest Coverage (times) 3.1 3.4

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

Rating history for last three years

Chronology of Rating History for the past
Current Rating (FY2020) 3 years
Date & Date & Date &
Amount Rating in Rating in Rating in
Rated Amount Date &Rating FY2019 FY2018 FY2017
(Rs. Outstanding August
Instrument Type crore) (Rs. crore) July 2019 July 2018 2017 March 2017
Fund [ICRA]BBB- [ICRA]BBB- [ICRA]BBB- [ICRA]BB+
1 Based Long- term 37.50 37.50 (Stable); (Stable); (Stable); (Positive);
facilities reaffirmed reaffirmed upgraded upgraded
Non-fund Long- [ICRA]BBB- [ICRA]BBB- [ICRA]BBB- [ICRA]BB+
2 Based term/Short- 52.50 52.50 (Stable)/A3; (Stable)/A3; (Stable)/A3; (Positive)/A3;
facilities term reaffirmed reaffirmed upgraded upgraded

Complexity level of the rated instrument

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The
classification of instruments according to their complexity levels is available on the website www.icra.in

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Annexure-1: Instrument details
Date of Amount
Issuance / Maturity Rated Current Rating and
ISIN No Instrument Name Sanction Coupon Rate Date (Rs. crore) Outlook
NA Fund Based facilities - - - 37.50 [ICRA]BBB- (Stable)
Non-fund Based
NA - - - 52.50 [ICRA]BBB- (Stable)/A3
facilities
Source: AJIPL

Annexure-2: List of entities considered for consolidated analysis: Not applicable

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ANALYST CONTACTS
K. Ravichandran Manish Ballabh
+91 44 4596 4301 +91 124 4545812
[email protected] [email protected]

Gaurav Singla Nishant Misra

+91 1244545 366 +91 1244545 862
[email protected] [email protected]

RELATIONSHIP CONTACT
Jayanta Chatterjee
+91 80 4332 6401
[email protected]

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
[email protected]

Helpline for business queries:

+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)

[email protected]

About ICRA Limited:

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services
companies as an independent and professional investment Information and Credit Rating Agency.

Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited
Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit
Rating Agency Moody’s Investors Service is ICRA’s largest shareholder.

For more information, visit www.icra.in

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