- Promoters extensive experience in retail industry; established track record of operations in Andhra Pradesh
CTAJPL's directors, Mr. Chandana Mohan Rao, Mr. Mavuri Venkata Ramana, Ms. Mavuri Venkata Padmavathi has been part of the day-to-day operations of the group since its inception in 1984. The business of retailing was initially started by Mr. Chandana Mohan Rao (also known as CMR) around 50 years ago and later the family members joined in the business. Chandana Brothers, with nearly four decades of leadership in retail business, is among the top retail enterprises in the state of Andhra Pradesh. The senior management team is ably supported by a strong line of mid-level managers. Mr. Mavuri Mohan Balaji, son of Mr. Mavuri Venkata Ramana, is the third generation of the family line and has joined the family business as the next successor. The extensive experience of the promoters is reflected through the established relationship with its suppliers. On the back of the presence of wide range of products targeting customers of different income category through separate brands (Chandana Brothers, CMR and Kanchi Kamakshi) and intensive promotions and advertisement for brand awareness.The operating income has improved to Rs.1627.94 Cr. in FY2022(Prov.) from Rs.1288.52 Cr. in FY2021 on account improvement in realizations and addition of eight new stores at CMR Bhimavaram, CMR Narsipatnam, CMR Ongole, CMR Narasannapeta, CMR Amalapuram, Kothagudem, M rage, KK bhimavaram . Acuité believes that CTAJPL will continue to derive benefits from its experienced management and established presence and track record of operations over the long term period.
- Widespread presence across A.P; new venture into multi-complex building development
CTAJPL operates various stores, showrooms & malls under the brand name of ‘Chandana Brothers’, ‘CMR’ and ‘Kanchi Kamakshi’. CTAJPL has its presence in the Visakhapatnam, Rajahmundry, Kakinada, Gopalapatnam, Vizianagaram, Srikakulam, Guntur, Bhimavaram, Ongole, Narasannapeta, Amalapuram, Kothagudem, Narsipatnam, Tirupathi, Eluru, Anakapalli and Gajuwaka region of Andhra Pradesh. CTAJPL has 25 operational stores and showrooms for retail trading of textiles, readymade garments, various kinds of jewellery and precious articles. The ‘Chandana Brothers’ and ‘CMR’ brand is established to target the customer base consisting of middle and lower middle income category individuals, whereas ‘Kanchi Kamakshi’ is established to target the customer base consisting of middle and upper middle income category individuals. The company also has ventured into the multi-complex building development business by constructing a multi-complex at Gajuwaka with build-up area of around 75,000 Sq.ft to have a stable rental income from tenants with reputed names such as Inox Leisure Limited and KFC, among others. Besides, CTAJPL has bought land at Rajahmundry and Kakinada for its plan to develop similar multi-complex based buildings. Acuité believes that the commencement of additional showroom and multi-complex building, along with capex underway for further development of multi-complex building will aid in strengthening of revenue and financial risk profile of the company.
- Above-average financial risk profile
The company’s financial risk profile is marked by a healthy net worth, gearing and moderate debt protection metrics. The net worth of the company stood at Rs.258.16 Cr and Rs.222.95 Cr as on March 31, 2022(Prov.) and 2021 respectively. The gearing of the company stood at 1.55 times as on March 31, 2022(Prov.) against 1.36 times as on March 31, 2021.The deterioration in the gearing is because increase in debt portion. Debt protection metrics – Interest coverage ratio and debt service coverage ratio stood at 2.92 times and 1.76 times as on March 31, 2022(Prov.) respectively as against 2.72 times and 1.45 times as on March 31, 2021 respectively. The deterioration in the DSCR is because increase in repayment. TOL/TNW (Total outside liabilities/Total net worth) stood at 3.00 times and 2.12 times as on March 31, 2022(Prov.) and 2021 respectively. The debt to EBITDA of the company stood at 4.29 times as on 31 March, 2022(Prov.) as against 3.54 times as on 31st March, 2021. Acuité expects the financial risk profile to remain above-average over the medium to long term period on account of healthy capital structure and stable operations of the company.
- Low customer and supplier concentration risk in revenue profile
CTAJPL have been successfully able to increase its geographical coverage by establishing various stores across the state of Andhra Pradesh. None of the single store out of the 25 operational stores of CTAJPL has contributed more than 20 percent to the total sales of the company. The prominent stores in terms of revenue contribution are located at Visakhapatnam, Gajuwaka, Gopalapatnam and Vizianagaram. The current suppliers are associated with the operations of the company for more than 5 years now. None of the single supplier of CTAJPL contributed more than 20 percent to the total purchases of the company. The company has wide variety of products offerings covering Men’s wear, Ladies wear, Kids wear in textiles segment and Bangles, Bracelets, Earrings, Enameil, Pendants, Rings and Wedding Bands in jewellery segment. CTAJPL jewellery division is the major contributor towards the total sales realized by the company over the last 4 financial years. Acuité believes that CTAJPL has low risk towards its revenue profile in terms of geographical, customer and supplier concentration and will benefit from its diversified product offerings over the medium term.
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- Working capital intensive operations
The working capital management of the company remained moderate gross current asset (GCA) days at 165 days as on March 31, 2022(Prov.) as against 138 days as on March 31, 2021. The GCA days are majorly marked by high inventory. Inventory days stood at 171 days as on March 31, 2022(Prov.) as against 144 days as on March 31, 2021. Subsequently, the payable period stood at 77 days as on March 31, 2022(Prov.) as against 43 days as on March 31, 2021 respectively. The debtor day stood at 1 days as on March 31, 2022(Prov.) as against nil days as on March 31, 2021. Further, the average bank limit utilization in the last seven months ended August, 2022 remained at 95 percent for fund based limits. Acuité expects the operations of the company to remain working capital intensive on account of the high inventory levels maintained by the company due to the nature of the retail industry and presence of inventory held at various stores. Acuité expects the operations of the company to remain working capital intensive on account of the high inventory levels maintained by the company due to the nature of the retail industry and presence of inventory held at various stores.
- Presence of intense competition in the sector; impact of change in regulations; susceptibility of operating margins to volatility in commodity prices.
The Indian retail sector is subjected to intense competition on account of presence of several organized as well unorganized players in the industry. The company faces intense competition from R.S. Brothers Group, Kalamandir Group, and J.C. Brothers Group etc. in the southern region of the country. Apart from this, regulatory intervention such as compulsory hallmarking, requirement of permanent account number (PAN) etc. change in regulation of gold related savings schemes coupled with changing consumer preferences etc. impacts the overall operating performance of the sector. Further, sudden change in gold prices also impact the gold demand. The improvement in operating metrics are subjected to the improvement in realizations due to the rise in gold prices, significant reduction in employee cost and other operating overheads. Acuité believes that the company’s business profile and financial profile can be adversely impacted on account of presence of stiff competition, any changes in regulations, changes in the commodity’s price and has uncertainty over the sustainability of the operating margins in medium to long term period.
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