­­Established market position on Amazon India platform
CRL is a registered seller with Amazon India and uses big data, ML tools, and AI tools to analyze and manage the customer requirements, product demand and taste preferences of customer which enables CRL to make better business decisions. This AI based technology helps to streamline, optimize and polish the various aspects of the brand and helps them to excel in e commerce market. Company is engaged in retail sales of products such as apparels, shoes, wireless accessories, musical instruments, office products and books. CRL maintains its inventory at Amazon’s fulfilment centres and pay fees to Amazon India for stock maintenance and delivery.

Moderate financial risk profile:
The financial risk profile of the company is moderate, marked by a healthy net worth, capital structure, and moderate debt protection metrics. The company’s net worth stood at Rs. 392.07 Cr. as of March 31, 2023, compared to Rs. 155.10 Cr. as of March 31, 2022. The improvement in net worth is attributed to an equity capital infusion of Rs. 19 Cr. by the Holding Company, addition of premium received on the issue of shares worth Rs. 171 Cr, and accretion of profits to reserves of Rs. 4.20 Cr. CRL’s capital structure is moderate, characterized by gearing and total outside liabilities to total net worth (TOL/TNW) ratios of 1.11 times and 2.72 times, respectively, as of March 31, 2023, compared to 0.02 times and 0.53 times as of March 31, 2022. Total debt of Rs.434.49 Cr. consist inter corporate deposits of Rs.190 Cr. as on March 31, 2023. The coverage indicators improved during FY23, with a Debt Service Coverage Ratio (DSCR) of 2.60 times as of March 31, 2023, compared to -1.95 times as of March 31, 2022. The interest coverage ratio stood at 3.28 times as of March 31, 2023, compared to -1.95 times as of March 31, 2022. The Debt to EBITDA ratio stood at 4.67 times as on March 31, 2023.

Moderate Working Capital cycle
CRL’s working capital operations are moderate in nature, as reflected by the gross current asset (GCA) of 119 days in FY23. Debtor days stood at 4 days in FY23. The company’s receivables are limited to Amazon India Ltd, and payments are typically received within 5 to 7 days. Inventory days are expected to remain around an average of 80 days due to bulk inventory purchased from the erstwhile seller. Timely receipts from Amazon India Ltd has enabled the company to maintain a surplus balance in its fund-based working capital limits.

­High Competition and Low Customer Loyalty in E-commerce Business
Despite the rapid expansion of the e-commerce industry, the Indian retail market is still dominated by traditional brick and mortar players, and many smaller unorganised players. The online retail sector is highly competitive with the presence of a large number of sellers providing bargaining power to customers with low switching costs, leading to very low customer loyalty. The competition in the e-tailing sector is rapidly evolving with large new entrants with strong financial flexibility foraying into the sector, the impact of which remains to be seen. Customers’ preference to prioritise spending on essentials amid increasing inflation and high fuel prices could also hurt the discretionary spending power in the near term.

Vulnerability to regulatory changes
In the past couple of years, the e-commerce industry has witnessed the introduction of several regulations that could have an impact on the operations of the entities involved. CRL’s business profile could also be impacted if any regulatory changes impact CRL’s market position or those of the brands and platforms it is associated with. However, given the current regulatory framework, we don't see any further regulatory challenges in the medium term.