Press Release

Vijay Sales (India) Private Limited

February 03, 2021
Ratings
Amount 1
Facilities Rating Rating Action
(Rs. crore)
CARE A+; Stable / CARE A1+
Long Term / Short Term Bank
100.00 (Single A Plus ; Outlook: Stable / Reaffirmed
Facilities
A One Plus)
100.00
Total Facilities
(Rs. One hundred crore only)
Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers

The reaffirmation of rating assigned to long term/short-term facilities of Vijay Sales (India) Private Limited (VSIPL) derives
strength from the experienced promoters, brand’s established track record in consumer electronic retail industry along with
key presence in Maharashtra, Gujarat, Delhi, Haryana and Uttar Pradesh, ownership model of operation for majority of
stores, increase in revenue & profitability during FY20 (April 1 to March 31), comfortable financial risk profile, de-risked
inventory holding model and efficient working capital management. The above ratings are constrained by stiff competition
from online and offline channels in consumer electronic retail industry and susceptibility of operating margins on performance
of new stores.

Rating Sensitivities
Positive Factors -
 Maintaining the capital structure with overall gearing (including guaranteed debt) less than 0.5x
 PBILDT margin of more than 8% on a sustained basis
 Significant diversification of geographical presence

Negative Factors-
 Increase in operating cycle to over 50 days due to stretched inventory cycle.
 Increase in overall gearing above 1.00x on sustained basis on account of higher working capital requirement or capex
funded through term loans
 Significant Increase in support to OVOT Pvt. Ltd.

Detailed description of the key rating drivers

Experienced Promoters
VSIPL is established by Mr. Nanu Gupta, he is having more than four decades of experience in electronic goods industry.
VSIPL is managed by Mr. Nanu Gupta and his two sons Mr. Ashish Gupta and Nilesh Gupta. Mr. Nanu Gupta is in charge of
finance department and sales of LCD/LED TVs; Mr. Nilesh Gupta is in charge of sales of digital devices, Human Resource and
Marketing and Mr. Ashish Gupta is in charge of sales of large appliances. VSIPL has experienced team of professional for
managing sales and inventory.

Established brand with key presence in Maharashtra, Gujarat, Delhi, Haryana and Uttar Pradesh
VSIPL is the one of the largest electronic appliance retailer in the country operating of multi-brand electronic stores under
the brand name ‘Vijay Sales’. VSIPL is an established brand having its key presence in Maharashtra, Gujarat, Delhi, Haryana
and Uttar Pradesh. Commencing its operations in October 1971, VS has 99 stores as on March 31, 2020. VSIPL derive its
major share of revenue i.e about 57.98% in FY20 from Maharashtra followed by Delhi (16.86%) & Gujarat (14.74%)

Increase in revenue and profitability aided by addition of new store

VSIPL revenue has increased during FY20, from Rs.3459.34 crore to Rs.3987.25 crore, an improvement of 15.26% the increase
in revenue is due to a combination of both increase in volumes sold & increasing number of stores. Similarly, PBILDT & PAT
levels have also increased on a y-o-y basis, with company having reduced its cost of materials during FY20, with favourable
pricing.

Comfortable financial risk profile

VSIPL has comfortable financial risk profile as characterised by comfortable overall gearing 0.12x as on March 31, 2020 vis-à-
vis 0.19x as on March 31, 2019. VSIPL does not have any term debt. VSIPL debt utilizations are lower due to efficient working

1
Complete definition of the ratings assigned are available at www.careratings.com and other CARE publications
1 CARE Ratings Limited
 Press Release

capital cycle. VSIPL business model enables VSIPL to collect cash from customers immediately whereas creditors extends
credit period ranging from 7-40 days. VSIPL has comfortable interest coverage ratio at 6.34x in FY20 (32.03x during FY19),
Further VSIPL’s other debt coverage ratio like TD/GCA has improved to 0.45x during FY20 vis-à-vis 1.42x during FY19.

Constitution of firm converted from Partnership to Private Company

As on May 07, 2020, the partnership firm “Vijay Sales” has been reconstituted as a private company “Vijay Sales (India)
Private Limited with paid up capital of Rs.1 crore. All the existing Fixed Capital of Partnership Firm have been termed as Paid
up Capital & floating capital / profits of partnership Firm have been termed as Reserves & Surplus.
The partners of the firm are the first directors of the company with shareholding as follows:
Name of Directors (Earlier Partners) Shareholding in the company (%) Profit sharing ratio (in the earlier partnership
firm)
Mr. Nanu Gupta 35.00 35.00
Mr. Nilesh Gupta 27.50 27.50
Mr. Ashish Gupta 27.50 27.50
Mr. Karan Gupta 10.00 10.00
The partners of the firm had not withdrawn any amounts from the business.

Key Rating Weaknesses

Threat from online and offline channels
VS derives majority of its revenue from Maharashtra, however, it has been expanding in other states and is exposed to
unforeseen region specific risk and competition from local players, online vendors like Flipkart, Amazon etc. who have been
resorting to heavy discounting.

Industry Outlook
Consumer durables index saw a y-o-y fall of 39.1% for the period of H1FY21 in comparison with a fall of 5.1% in H1FY19. This
decline in first half of FY21 reflects the impact of nationwide lockdown and consequent fall in consumer demand. Surrounded
by uncertainties due to Covid-19 and with reduced income in their hands, consumers became prudent in terms of spending
their money for discretionary items. Interestingly, some of the products reported nil sales during the month of April 2020.

Air Conditioners (ACs)

ACs, essentially a seasonal product and heavily dependent on summer season for sales, witnessed a sharp decrease in
production by 79% in H1FY21 to 3.4 lakh units from 16.2 lakh units in H1FY20.
Television sets
The production of television sets fell from 13.2 lakh units in H1FY20 to 9.5 lakh units in H1FY21, a fall of 28%. However, the
production gradually started increasing from May. This rise in demand could be driven by increase in screen time as people
spent more time at home during lockdown. Also, absence of theatrical experience due to closure of theatres may have led to
rise in demand for large screen TV sets.

Washing/laundry machines, refrigerators & electric cooking appliances

The production of items that enhance personal home convenience such as refrigerators, washing/laundry machines and
electric cooking appliances like toasters, food processors etc witnessed a decline in H1FY21 but increased sequentially on a
month-on-month basis from May onwards as can be seen from the charts below. This growth was particularly driven by
change in consumer behaviour during lockdown as people focussed on making their lives at home easier and simpler.

Covid-19 induced lockdown affected the sale of varied consumer durables during H1FY21. A lot of consumer durable
products that are essentially discretionary in nature witnessed a decline as consumers began spending cautiously with
reduced income in their hands and their need to preserve money. With the exception of computers, the production of most
of the products such as TV sets, washing machines, refrigerators etc fell but started increasing from the month of May.
It is expected that as Covid-19 induced restrictions are being eased gradually and retail stores and malls are allowed to
operate, consumer demand will continue to gain traction albeit at a slow pace and will take time to reach pre-Covid levels. It
depends on the containment of the spread of the virus domestically as well as globally.

Liquidity : Adequate
Liquidity is marked by strong accruals against nil repayment obligations and cash and cash equivalents to the tune of Rs.11.72
crore & Fixed Deposits amounting to Rs.110 crore as on December 16, 2020. Firm has gearing of 0.12 times as of March 31,
2020. Current ratio for the company is at 1.62x as on March 31, 2020. The company’s capex going ahead are to be funded by
internal accruals and/or equity infusion.

2 CARE Ratings Limited

 Press Release

Analytical approach:
Standalone after factoring corporate guarantee extended to OVOT Pvt. Ltd.

Applicable Criteria
Criteria on assigning ‘outlook’ and ‘credit watch’ to Credit Ratings
CARE’s Policy on Default Recognition
Financial ratios – Non-Financial Sector
Rating Criteria for Short Term Instruments
Rating Methodology: Consolidation and Factoring Linkages in Ratings
Retail Methodology-Organized Retail Companies

About the Company

Established in 1967 by Mr. Nanu Gupta, M/s Vijay Sales (VS) is chain of multi brand electronic stores. On May 07, 2020, the
firm was re-constituted as a private company with name as “Vijay Sales (India) Private Limited (VSIPL). VSIPL is currently
managed by Mr. Nanu Gupta and his two sons Mr. Nilesh Gupta and Mr. Ashish Gupta. VSIPL was earlier established in 1967
as a Small Television showroom by Mr. Nanu Gupta, later in 2001 Vijay Sales was incorporated as partnership firm. As on
March 31, 2020, VSIPL had 99 operational stores. VSIPL operates majorly in Maharashtra, Gujarat, Delhi, Haryana and Uttar
Pradesh. VSIPL also has its in-house brand “Vise”; Vise offers wide range of Televisions, Washing Machines and Air
Conditioners which are exclusively available at VSIPL.

Brief Financials (Rs. crore) FY19 (A) FY20 (A)

Total operating income 3459.34 3987.25
PBILDT 132.62 333.06
PAT 40.35 139.79
Overall gearing (times) 0.19 0.12
Interest coverage (times) 32.03 6.34
A: Audited
Status of non-cooperation with previous CRA:
Not Applicable

Any other information:

Not Applicable

Rating History for last three years: Please refer Annexure-2

Covenants of rated instrument / facility: Detailed explanation of covenants of the rated instruments/facilities is given in
Annexure-3 - NA
Complexity level of various instruments rated for this company: Annexure 4

Annexure-1: Details of Instruments/Facilities

Size of the Rating assigned
Name of the Date of Coupon Maturity
Issue along with Rating
Instrument Issuance Rate Date
(Rs. crore) Outlook
Fund-based/Non-fund- CARE A+; Stable /
- - - 100.00
based-LT/ST CARE A1+

Annexure-2: Rating History of last three years

Current Ratings Rating history
Name of the Type Rating Date(s) & Date(s) & Date(s) & Date(s) &
Sr. Amount
Instrument/Bank Rating(s) Rating(s) Rating(s) Rating(s)
No. Outstanding
Facilities assigned in assigned in assigned in assigned in
(Rs. crore)
2020-2021 2019-2020 2018-2019 2017-2018
CARE A+; 1)CARE A+; 1)CARE A+; 1)CARE A+;
Fund-based/Non-fund- Stable / Stable / Stable / Stable /
1. LT/ST 100.00 -
based-LT/ST CARE CARE A1+ CARE A1+ CARE A1+
A1+ (03-Apr-20) (24-Sep-19) (29-Mar-19)

3 CARE Ratings Limited

 Press Release

Annexure-3: Detailed explanation of covenants of the rated instrument / facilities

Annexure 4: Complexity level of various instruments rated for this company

Sr. No. Name of instrument Complexity level
1 Fund-based/Non-fund-based-LT/ST Simple

Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity.
Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.

Contact us
Media Contact
Mradul Mishra
Contact no. – +91-22-6754 3573
Email ID – [email protected]

Analyst Contact
Soumya Dasgupta
Contact no.- 9004691428
Email ID- [email protected]

Relationship Contact
Ankur Sachdeva
Contact no.- +91-22-67543495
Email ID: [email protected]

About CARE Ratings:

CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit
rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an
External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in
the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that
helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment
decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our
domain and analytical expertise backed by the methodologies congruent with the international best practices.

Disclaimer
CARE’s ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not
recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security.
CARE’s ratings do not convey suitability or price for the investor. CARE’s ratings do not constitute an audit on the rated
entity. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable.
CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for
any errors or omissions or for the results obtained from the use of such information. Most entities whose bank
facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank
facilities/instruments. CARE or its subsidiaries/associates may also have other commercial transactions with the entity. In
case of partnership/proprietary concerns, the rating /outlook assigned by CARE is, inter-alia, based on the capital deployed
by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case
of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial
performance and other relevant factors. CARE is not responsible for any errors and states that it has no financial liability
whatsoever to the users of CARE’s rating. Our ratings do not factor in any rating related trigger clauses as per the terms of
the facility/instrument, which may involve acceleration of payments in case of rating downgrades. However, if any such
clauses are introduced and if triggered, the ratings may see volatility and sharp downgrades.

**For detailed Rationale Report and subscription information, please contact us at www.careratings.com

4 CARE Ratings Limited