| Established track record of operations and experienced management
The Gold star group has established presence since 1990, in manufacturing and export of diamond-studded gold jewellery and diamonds. The Group has established presence of over three decades in the industry and primarily exports to the USA and Europe. The long-term relations with some of the renowned wholesalers and retailers in the market has helped the group in getting regular flow of orders. Gold star group also deals with customers in Australia, Canada, and Italy to name a few. The directors extensive experience of over three decades in the gems and jewellery industry and long relationship with its customers has resulted in stable revenues. The Board is well supported by second line of experienced management team. The operating income of the Group improved and stood at Rs.1865.39 crore in FY22, as against Rs.1182.75 crore in FY21. In 9MFY2023, the Group has generated revenue of Rs.1599 Cr and is expected to close the year in the range of Rs.1850 – Rs.1950 Cr. The performance is in line with the industry trend. As per GJEPC reports, the financial year 2021-2022 saw significant resurgence in the gems and jewellery exports which grew by 11.05 % in comparison to the precovid level. Subsequently, from April-October 2022, India's gems and jewellery exports recorded a 1.21% rise compared to the previous year's period. Acuité believes that with its long track record of over two decades in the business and long-standing relationship with its customers, the group will continue to benefit from its established market position over the medium term.
Healthy Financial risk profile
The Group’s financial risk profile is healthy marked by its healthy net worth, comfortable gearing and debt protection measures. The tangible net worth of the Group increased to Rs. 564.79 crore as on March 31, 2022 as against Rs. 498.30 crore as on March 31, 2021. The Group’s gearing stood at 0.58 times as on March 31, 2022, as against 0.54 times in the March 31, 2021. The total debt of Rs.328.70 crore as on March 31, 2022, consists of long-term borrowings of Rs.41.21 crore and short-term debt obligations of Rs.271.23 crore. The Group in FY2022 availed additional term loan of Rs. 13.80 Cr towards its ongoing capex. The Group had bought a new manufacturing facility adjoining to its existing facility in Seepz. The Group has taken a term loan of Rs.30 crore for the new factory. Further, the working capital limits of its banking facilities were enhanced to Rs.329.76 Cr during the year. However, considering additional debt, the gearing is expected to remain in the range of 0.41-0.55 times over the medium term. Moreover, the debt protection metrics supported by improving scale of operations and profitability margins continue to remain comfortable, marked by an interest coverage ratio of 4.82 times in FY2022 as against 6.79 times in the FY2021. The DSCR stood at 3.04 times in FY2022 as against 6.00 times in FY2021. Acuité believes that the financial risk profile of the Group is expected to remain healthy in the medium term.
|
| Working capital intensive nature of operations
GS Group’s operations are working capital intensive reflected by Gross Current Assets (GCA) of 201 days as on March 31, 2022, as against 266 days as on March 31, 2021. The inventory days stood at 69 days as on March 31, 2022, as against 65 days as on March 31, 2021. The average inventory holding period of the Group is around 45-50 days.. The debtor days stood at 128 days as on March 31, 2022, as against 186 days as on March 31, 2021. Average credit period allowed to the customers are around 100-150 days. The creditors days stood at 85 days as on March 31, 2022, as against 95 days as on March 31, 2021. Average credit period received from the suppliers is around 60 days. Working capital requirement is funded through bank lines, the average utilisation of bank facilities is ~85 percent for 6 months ended as on November 2022 for Gold Star Jewellery Pvt Ltd and ~63 percent for 6 months ended as on November 2022 for Gold Star Diamond Pvt Ltd. Acuité believes the Group's ability to restrict further elongation in working capital cycle will be a key rating sensitivity.
Susceptibility to volatility in raw material prices, foreign exchange fluctuation risk
The Group is exposed to volatility in gold and diamond prices. The raw material is procured from the domestic market and overseas market. Hence the Group is exposed to raw material price fluctuation risk. Furthermore, the Gold Star Group derives most of its revenues from export sales. Hence, the profits are susceptible to fluctuations in forex rates. However, these risks are partially mitigated as the Group has export forwards as well as gold forwards with the banks.
|
