| Experienced management and establish track record of operations
VG has been operating since 1982 and deals in rough and polish diamonds ranging from smaller sizes (0.30 to 0.99 carats) to larger stones of up to 3 carats. The partners of have over four decades of experience in the gems and jewellery industry. The firm derives around 55 percent of its revenue from exports to key markets such as the UAE, Hong Kong, the USA, Belgium, and others. Around 80 percent of the firm’s revenue comes from diamonds below 1 carat, with the remaining 20 percent from stones above 1 carat. Hong Kong contributes the largest share of revenue at ~32 percent, followed by the UAE at ~23 percent.
Improving financial risk profile
The financial risk profile of VG is characterized by moderate networth, low gearing and average debt coverage metrics. The tangible networth of the firm stood at Rs. 165.29 Cr. post profit accretion against Rs. 162.44 Cr. in FY2024.
The gearing continues to remain below unity at 0.78 times along with moderate TOL/TNW levels of 1.24 times in FY2025. The Debt-EBITDA levels, though high, declined to 6.68 times in FY2025 from 7.22 times in FY2024. The interest coverage ratio (ICR) also improved marginally to 1.58 times in FY2025 from 1.50 times in FY2024. However, the debt service coverage ratio (DSCR) stood low at 0.84 times in FY2025.
Going forward, improvement in the debt protection metrics will be a key monitorable.
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| Declining operating performance
The operating revenue of the firm stood flat at Rs. 417.15 Cr. in FY2025 (Rs. 416.84 Cr. in PY), aided by the improved sales volumes despite declining realization prices. However, the declining trend continued further, leading to significant moderation in the revenue in FY2026 wherein revenue stood at Rs. 287.82 Cr. for 11M FY2026 as against Rs. 364.35 Cr. for the corresponding period in the previous year. This is due to the overall slowdown in the cut and polish diamond industry due to low demand, imposition of tariffs, competition from lab grown diamonds. Further, the impact of current geopolitical developments will also remain a key monitorable.
Further, the operating profitability margin declined and stood at 3.93 percent in FY2025 from 4.59 percent in FY2024. Although operating margin improved to 4.60 percent during 11M FY2026 due to cash discounts on early credit payments, the firm’s EBITDA margin has generally remained within the 3.5 – 4.5 percent range over the past years. On the other hand, the PAT margin improved to 1.19 percent in FY2025 from 0.96 percent in FY2024 on account of reduced finance cost, due to reduction in the overall debt levels.
Going forward, improvement in the net cash accruals will be a key rating sensitivity.
Intensive working capital operations
The intensive working capital cycle of the firm is evident from its high gross current assets (GCA) of 300 days in FY2025. The GCA days are driven by the high inventory period of 188 days and receivable period of 115 days in FY2025. On the other hand, the creditor days stood at 71, making the firm highly reliant on working capital limits to fund the cashflow gap. The average bank limit utilization stood at 94.27 percent for the last six months ended January 2026.
Going forward, improvement in the working capital cycle will be a key monitorable.
Inherent risk of capital withdrawal in a partnership firm
The firm is susceptible to the inherent risk of capital withdrawal given its constitution as a partnership firm. The partners had withdrawn some of their funds in FY2024, which had led to decline in the overall networth in FY2024 from FY2023. Any further significant withdrawal from the partner’s capital having a negative bearing on the financial risk profile of the firm shall be a key rating sensitivity.
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