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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 30.00 | ACUITE BBB | Stable | Assigned | - |
| Bank Loan Ratings | 75.00 | ACUITE BBB | Stable | Upgraded | - |
| Total Outstanding | 105.00 | - | - |
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Rating Rationale |
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Acuité has upgraded the long-term rating to ‘ACUITE BBB’ (read as ACUITE triple B) from ‘ACUITE BB+’ (read as ACUITE double B plus) on the Rs.75.00 Cr. bank facilities of Caps Gold Private Limited (CAPS). The outlook is 'Stable'.
Acuité has assigned the long-term rating to ‘ACUITE BBB’ (read as ACUITE triple B) on the Rs.30.00 Cr. bank facilities of Caps Gold Private Limited (CAPS). The outlook is 'Stable'. Rationale for upgrade : The rating upgrade takes into account the improved operating revenue in FY2024 (Prov), comfortable financial risk profile, and adequate liquidity position of CAPS. The operating income of CAPS has shown 20.48 percent YOY growth in FY2024 (Prov) as compared to the previous year FY2023, which stood at Rs.8385.27 Cr. in FY2024(Prov) as against Rs. 6959.90 Cr. in FY2023. The operating margins ranged between 0.16-0.21 percent for the last two years ended FY2024 (Prov). The financial risk profile of CAPS continues to be comfortable, with comfortable debt protection metrics, low gearing, and efficient working capital management. The rating, however, remains constrained by intense competition, exposure to regulatory risks, and thin margins in the gold trading business. |
| About the Company |
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Caps Gold Private Limited (CAPS) is a Hyderabad based company established in 1901, by Chanda Anjaiah. CAPS Gold is a Wholesaler in precious metals (Gold & Silver) and also engaged in retail jewellery business. The company's day to day operations are managed by Mr. Chanda Venkatesh (Managing Director) and his family. The company operates 4 gold retail showrooms under the brand name of KALASHA in Telangana (2) and one each in Karnataka and Andhra Pradesh.
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| Unsupported Rating |
| Not applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profiles of CAPS to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
The promoters Mr. Chanda Venkatesh and his family have been in the gold business for around 120 years and have strong relationships with its diversified customer portfolio, which comprises retailers about 4000+ across India, to support the repeated business and volume growth over the years. CAPS’s customers in the domestic market include jewellers, traders, bullion dealers, wholesalers, and retailers’ agents located across the cities in India. CAPS benefits from a strong system, management, customer/supplier tie-ups, and infrastructure support from its promoters. Acuite believes that CAPS’s business risk profile is expected to benefit from the experienced management supported by strong second and third lines of personnel who are expected to continue to support CAPS’s market position over the medium term.
The company has reported YOY growth of ~20.48 percent in FY2024(Prov) as compared to the previous year, which stood at Rs.8385.27 Cr. in FY2024(Prov), as against Rs. 8997.92 Cr. owing to an improved customer base across the states in its bullion trading operations. Further, the company operates with three showrooms under the brand name Kalasa in Telangana (2) and one in Andhra Pradesh. Despite the improvement in revenue, CAP’s operating profitability was low, reported at 0.16 percent in FY2024 (Prov) (FY2023: 0.21 percent) due to the trading nature of operations with very limited value addition. The company’s profitability metrics are vulnerable to fluctuations in gold prices. Acuité believes the revenue of the company will be stable going forward based on the general standard in this industry.
The financial risk profile of the company has remained moderate, with comfortable debt protection metrics and low gearing. The net worth of the company stood at Rs.82.14 Cr. and Rs.72.05 Cr. as on March 31, 2024 (prov) and 2023, respectively. The improvement is on account of the healthy accumulation of net profit in the reserves. The gearing of the company stood at 0.67 times as on March 31, 2024 (prov), as opposed to 0.85 times as on March 31, 2023. CAPS's debt protection metrics are comfortable, marked by: Interest coverage ratio and debt service coverage ratio stood at 2.95 times and 2.51 times as on March 31, 2024 (prov), respectively, as against 5.99 times and 4.29 times as on March 31, 2023, respectively. TOL/TNW stood at 1.39 times and 1.59 times as on March 31, 2024 (prov), and 2023 respectively. The debt to EBITDA of the company stood at 3.60 times as on March 31, 2024 (prov) as against 3.70 times as on March 31, 2023. Acuité believes that the financial risk profile of the CAPS is expected to be healthy over the medium term.
CAPS's working capital management is efficient, with gross current assets days (GCA) of 7 to 8 days historically due to prudent inventory management and efficient collection of trade receivables supported by reputed clientele during the last 2 years, which ended on March 31, 2024 (Prov). The inventory days are 3–4 days, and the debtor days are at a day due to all the transactions being on a cash and carry basis during the last 2 years ending on March 31, 2024 (prov). As all the transactions of the company are made against advance payments, the working capital requirement for operations would remain low. The average fund bank limit utilization stood at about 31 percent over nine months ended May 2024. Acuité believes that CAPS operation continues to be efficiently managed supported by moderate net worth, efficient collection mechanism and in time inventory levels.
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| Weaknesses |
CAPS’s gold trading operations remain exposed to uncertainties related to regulatory measures adopted by the GoI through the Director General of Foreign Trade (DGFT) and the Reserve Bank of India (RBI). Revenue and profitability also depend on duty structures, and any adverse change in these can impact the operating performance of CAPS. The bullion trading industry is marked by intense competition as there are low entry barriers due to low capital requirements. The price of gold is highly volatile and depends on the prices in the international market. Further Gold jewelry retailing is a highly fragmented segment, with the presence of large organized players and numerous unorganized ones. Acuité believes the industry will remain exposed to regulatory interventions and gold price volatility, which will continue to impact the demand-supply scenario.
The company is primarily a trading agent dealing in the procurement and distribution of bullion (like gold and silver). Owing to the low-value additive nature of the business and intense competition, the operating profit margin of the company remained low and stood at 0.16 percent in FY2024 (Prov). Acuité believes that from the refinery unit in FY2025, duty advantage will aid the company in improving margins over the medium term.
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| Rating Sensitivities |
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| Liquidity Position: Adequate |
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The company’s liquidity is adequate, with adequate NCAs for its repayment obligations. The companypany generated cash accruals of Rs.10.08 Cr. during FY2024 (Prov), while it’s maturing debt obligations were Rs.0.24 Cr. during the same period. The cash accruals of the company are estimated to remain around Rs.10.42-12.73 Cr. during FY2025-26, while their repayment obligations are Rs.1.10-1.14Cr during the same period. The company has maintained unencumbered cash and bank balances Rs.11.77 Cr. and the current ratio stood at 2.10 times as on March 31, 2024 (prov). The average fund bank limit utilization stood at about 31 percent over nine months ended May 2024. Acuité expects that the liquidity of the company is likely to be adequate over the medium term on account of healthy cash accruals.
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| Outlook: Stable |
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Acuité believes that CAPS will maintain a'stable' outlook over the medium term, owing to its experienced management, long-track record of operations, and established brand presence. The outlook may be revised to 'Positive' in case the CAPS registers healthy growth in its revenue while sustaining profitability margins. Conversely, the outlook may be revised to 'Negative' in case of any sharp decline in its revenues, volatility in its profitability, or any significant stretch in its working capital management leading to deterioration in the financial risk profile and liquidity position.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 8385.27 | 6959.90 |
| PAT | Rs. Cr. | 8.33 | 8.28 |
| PAT Margin | (%) | 0.10 | 0.12 |
| Total Debt/Tangible Net Worth | Times | 0.67 | 0.85 |
| PBDIT/Interest | Times | 2.95 | 5.99 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Trading Entities: https://www.acuite.in/view-rating-criteria-61.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in
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