Press Release

Press Release

March 26, 2025

KARP IMPEX LIMITED
Rating Downgraded

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	1050.00	ACUITE BBB- \| Stable \| Downgraded	-
Total Outstanding	1050.00	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

Acuite has downgraded the long-term rating to 'ACUITÉ BBB-’ (read as ACUITÉ Triple B Minus) from ‘ACUITÉ BBB’ (read as ACUITÉ Triple B) on the Rs. 1050.00 Cr. bank facilities Karp Impex Limited (KIL). The outlook is “Stable”.

Rationale for Downgrade
The rating factors the declining operating performance of the company marked by declining turnover in the last 3 fiscal years, albeit stable operating margins and slight moderation in net profit margin. The operating income of the company stood at Rs. 1852.59 Cr. in FY24 as against Rs. 2072.81 Cr. in FY23. The decline in turnover has largely been due to overall decline in the natural diamond industry and the shift in demand towards Lab Grown Diamonds. The company has its presence in both domestic and international market, with its major revenues being sourced from countries like Hongkong, Dubai and Belgium for FY24 i.e., ~65% of the total revenue. The company in the current year has recorded revenue of Rs. 983.22 Cr. till 9MFY25. Further, the operating profit margin remained stable at 5.72% in FY24 as against 5.67% in FY23. The rating also considers a healthy financial risk profile and adequate liquidity of the company. The rating draws comfort from experienced management and established track record of operations. However, the rating remains constrained due to the elongated working capital cycle.

About the Company

Mumbai-based Karp Impex limited (KIL) was established as a partnership firm in 1983 by Mr. Anil B. Virani and Mr. Kishore B. Virani. The firm was converted to a closely held public limited company in 1995. KIL is engaged in processing and trading cut & polished diamonds of size ranging between 4 cents to 3 carats. KIL has been a DTC sight certificate holder since 1993 and has manufacturing facilities located in Mumbai and Surat. The company is one of the few manufacturers for ‘Forever’ mark diamonds. KIL is an exclusive supplier of patented cut and polished diamonds set in writing instruments and women’s accessories manufactured by Mont Blanc. KIL derives ~70-80 per cent of its revenues from manufacturing and processing of cut and polished diamonds, while the remaining revenues arise from trading of cut and polished diamonds and rough diamonds.

Unsupported Rating

Not Applicable

Analytical Approach

Acuité has taken the standalone approach while assessing the business and financial risk profile of KIL to arrive at the rating.

Key Rating Drivers

Strengths

Experienced management, established track record of operations
KIL started operations in 1983 to process and sell polished diamonds. The promoters, Mr. Anil B. Virani and Mr. Kishore B. Virani, have more than 3 decades of experience in the diamond industry. This has helped the company in maintaining good business relations with clients. KIL exports around 65 percent of its total sales primarily in the markets of Hong Kong, Belgium and Dubai and imports around 75 percent of its total requirement of rough diamonds from Botswana, Hong Kong and Dubai. Acuite believes that despite the scale of operations declining, the business would continue to benefit from the experienced management over the medium term.
Healthy Financial Risk Profile
The financial risk profile of the company stood healthy, marked by low gearing and comfortable debt protection metrics. The tangible net-worth of Rs. 847.48 Cr. as on 31st March 2024 against Rs. 808.68 Cr. as on 31st March 2023. The improvement can be attributed to ploughing back of profits. The total debt of the company is Rs. 572.53 Cr. as on 31st March 2024 against Rs. 572.93 Cr. as on 31st March 2023. The gearing stands low at 0.68 times in FY24 against 0.71 times in FY23. Further, the interest coverage ratio of the company stood at 2.09 times in FY24 against 2.45 times in FY23. The debt service coverage ratio stood at 1.82 times in FY24 against 1.95 times in FY23. The TOL/TNW stood at 0.79 times in FY24 against 0.91 times in FY23. Acuité believes that the financial risk profile of KIL is likely to remain healthy over the medium term.

Weaknesses

Decline in scale of operations and moderation in profitability margins
The company have achieved a revenue of Rs. 1852.59 Cr. in FY24 against Rs. 2072.81 Cr. in FY23. The decrease of 10.62% is attributed to the overall decline of the diamond manufacturing industry because of the introduction of a substitute product “Lab Grown Diamonds”, reduced demand in major export destinations (America & China) and supply side issues such as G7 Sanctions on Russian origin diamonds. The EBITDA margins of the company stood at 5.72% in FY24 as compared to 5.67% in FY23. The PAT margins of the company stood at 2.04% in FY24 as compared to 2.35% in FY23. The decrease in PAT was because of the increase in interest costs. The topline of the company for 9MFY2025 is Rs. 983.22 Cr. Acuité believes that KIL is likely to observe moderation in profitability margins and is likely to face challenges to maintain the topline on account of decreased demand of natural diamonds in the national & international markets coupled with the entry of the lab grown diamonds.
Intensive Working Capital Operations
The working capital operations of the company remained intensive marked by GCA days which stood at 287 days as on as on 31st March 2024 against 261 days as on 31st March 2023. The inventory and debtor days of the company stood at 189 days and 101 days respectively as on 31st March 2024 against 138 days and 126 days respectively as on 31st March 2023. The increase in inventory days can be attributed to the accumulation of rough diamond inventory, which remained due to the management's optimistic outlook on demand in the domestic market. However, this anticipated demand did not materialize due to a decline influenced by multiple factors. On the other hand, the creditor days of the company stood at 18 days as on 31st March 2024 against 27 days as on 31st March 2023. Acuité believes that KIL is likely to see an increase in the working capital operations on account of increased inventory from the decreased demand in the market.
Susceptibility of profitability margins to volatility in prices of diamonds and fluctuations in forex risk
Due to the high inventory holding period, the Company runs an inherent risk of volatility in raw material prices. The Company imports ~75 percent of its raw material requirements, i.e. rough diamonds and its exports range between 60-70 percent of its total sales. The forex risk in exports is largely covered against imports, however, the price volatility risk in rough diamonds threatens the thin profitability margins of the company due to long working capital cycles.

ESG Factors Relevant for Rating

In case of Gems and Jewellery industry, on the social front, labour management issues, such as employee safety & development and employment quality, remain a crucial risk in manufacturing industry. Additionally, key material issues such as responsible procurement, community support & development, product safety & quality, human rights, equal opportunity & employee development can influence social scores. Further on the environment front, GHG emissions, material efficiency, waste management, environmental management, energy efficiency and green supply chain are significant environmental issues in the manufacturing industry. Additionally, key material issues such as ESG reporting transparency, biodiversity impact and green products can influence environmental scores.

Rating Sensitivities

Movement in scale of operations
Movement in profitability
Movement in capital structure
Movement in working capital cycle

Liquidity Position

Adequate

The liquidity profile of the company is adequate. The company generated a net cash accrual of Rs. 41.66 Cr. as on as on 31st March 2024 against nil debt repayment obligations in the same period. The current ratio of the company declined to 2.18 times as on 31st March 2024 against 2.02 times as on 31st March 2023 because of decrease in trade payables. This decrease was observed because of the strategic decision to halt the purchase of additional raw materials because of decreased demand. The NCA/TD stood at 0.07 times in FY24 as against 0.09 times in FY23. Further, the average bank limit utilization at the month end balance stood low at 61% for 6 months ending Feb 25. Acuité believes that the liquidity of KIL is likely to remain adequate over the medium term on account of steady and sufficient cash accruals against the debt repayment obligations.

Outlook : Stable

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 24 (Actual)	FY 23 (Actual)
Operating Income	Rs. Cr.	1852.59	2072.81
PAT	Rs. Cr.	37.84	48.76
PAT Margin	(%)	2.04	2.35
Total Debt/Tangible Net Worth	Times	0.68	0.71
PBDIT/Interest	Times	2.09	2.45

Status of non-cooperation with previous CRA (if applicable)

Not Applicable

Interaction with Audit Committee anytime in the last 12 months (applicable for rated-listed / proposed to be listed debt securities being reviewed by Acuite)

Not applicable

Any other information

None

Applicable Criteria

• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm
• Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm

Note on complexity levels of the rated instrument

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.

Rating History

Date	Name of Instruments/Facilities	Term	Amount (Rs. Cr)	Rating/Outlook
29 Dec 2023	Post Shipment Credit	Long Term	52.00	ACUITE BBB \| Stable (Reaffirmed)
	Proposed Packing Credit	Long Term	343.70	ACUITE BBB \| Stable (Reaffirmed)
	PC/PCFC	Long Term	10.53	ACUITE BBB \| Stable (Reaffirmed)
	Post Shipment Credit	Long Term	10.47	ACUITE BBB \| Stable (Reaffirmed)
	PC/PCFC	Long Term	118.65	ACUITE BBB \| Stable (Reaffirmed)
	Post Shipment Credit	Long Term	118.65	ACUITE BBB \| Stable (Reaffirmed)
	Post Shipment Credit	Long Term	25.00	ACUITE BBB \| Stable (Reaffirmed)
	PC/PCFC	Long Term	34.00	ACUITE BBB \| Stable (Reaffirmed)
	Post Shipment Credit	Long Term	51.00	ACUITE BBB \| Stable (Reaffirmed)
	PC/PCFC	Long Term	5.20	ACUITE BBB \| Stable (Reaffirmed)
	Post Shipment Credit	Long Term	7.80	ACUITE BBB \| Stable (Reaffirmed)
	PC/PCFC	Long Term	35.00	ACUITE BBB \| Stable (Reaffirmed)
	PC/PCFC	Long Term	60.00	ACUITE BBB \| Stable (Reaffirmed)
	Post Shipment Credit	Long Term	87.00	ACUITE BBB \| Stable (Reaffirmed)
	PC/PCFC	Long Term	17.40	ACUITE BBB \| Stable (Reaffirmed)
	Post Shipment Credit	Long Term	23.60	ACUITE BBB \| Stable (Reaffirmed)
	PC/PCFC	Long Term	50.00	ACUITE BBB \| Stable (Reaffirmed)
30 Sep 2022	PC/PCFC	Long Term	35.00	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	Post Shipment Credit	Long Term	52.00	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	Proposed Packing Credit	Long Term	448.38	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	PC/PCFC	Long Term	10.53	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	Post Shipment Credit	Long Term	15.79	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	PC/PCFC	Long Term	62.94	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	Post Shipment Credit	Long Term	94.36	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	Post Shipment Credit	Long Term	25.00	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	PC/PCFC	Long Term	34.00	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	Post Shipment Credit	Long Term	51.00	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	PC/PCFC	Long Term	5.20	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	Post Shipment Credit	Long Term	7.80	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	PC/PCFC	Long Term	64.00	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	Post Shipment Credit	Long Term	93.00	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	PC/PCFC	Long Term	17.40	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	Post Shipment Credit	Long Term	23.60	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)
	PC/PCFC	Long Term	10.00	ACUITE BBB \| Stable (Upgraded from ACUITE BBB- \| Stable)

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
Exim Bank	Not avl. / Not appl.	PC/PCFC	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	21.00	Simple	ACUITE BBB- \| Stable \| Downgraded ( from ACUITE BBB )
State Bank of India	Not avl. / Not appl.	PC/PCFC	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	95.00	Simple	ACUITE BBB- \| Stable \| Downgraded ( from ACUITE BBB )
Bank of India	Not avl. / Not appl.	PC/PCFC	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	34.00	Simple	ACUITE BBB- \| Stable \| Downgraded ( from ACUITE BBB )
Yes Bank Ltd	Not avl. / Not appl.	PC/PCFC	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	5.20	Simple	ACUITE BBB- \| Stable \| Downgraded ( from ACUITE BBB )
Union Bank of India	Not avl. / Not appl.	PC/PCFC	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	60.00	Simple	ACUITE BBB- \| Stable \| Downgraded ( from ACUITE BBB )
Punjab National Bank	Not avl. / Not appl.	PC/PCFC	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	17.40	Simple	ACUITE BBB- \| Stable \| Downgraded ( from ACUITE BBB )
RBL Bank	Not avl. / Not appl.	PC/PCFC	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	10.00	Simple	ACUITE BBB- \| Stable \| Downgraded ( from ACUITE BBB )
IDBI Bank Ltd.	Not avl. / Not appl.	PC/PCFC	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	12.50	Simple	ACUITE BBB- \| Stable \| Downgraded ( from ACUITE BBB )
Punjab National Bank	Not avl. / Not appl.	Post Shipment Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	23.60	Simple	ACUITE BBB- \| Stable \| Downgraded ( from ACUITE BBB )
Union Bank of India	Not avl. / Not appl.	Post Shipment Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	87.00	Simple	ACUITE BBB- \| Stable \| Downgraded ( from ACUITE BBB )
Yes Bank Ltd	Not avl. / Not appl.	Post Shipment Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	7.80	Simple	ACUITE BBB- \| Stable \| Downgraded ( from ACUITE BBB )
Bank of India	Not avl. / Not appl.	Post Shipment Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	51.00	Simple	ACUITE BBB- \| Stable \| Downgraded ( from ACUITE BBB )
State Bank of India	Not avl. / Not appl.	Post Shipment Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	95.00	Simple	ACUITE BBB- \| Stable \| Downgraded ( from ACUITE BBB )
IDBI Bank Ltd.	Not avl. / Not appl.	Post Shipment Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	12.50	Simple	ACUITE BBB- \| Stable \| Downgraded ( from ACUITE BBB )
Not Applicable	Not avl. / Not appl.	Proposed Packing Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	518.00	Simple	ACUITE BBB- \| Stable \| Downgraded ( from ACUITE BBB )

Contacts

Mohit Jain
Senior Vice President - Rating Operations

Shubham Jain
Associate Analyst - Rating Operations

Contact details exclusively for investors and lenders

Mob: +91 8591310146
Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai.

Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating.

Note: None of the Directors on the Board of Acuité Ratings & Research Limited are members of any rating committee and therefore do not participate in discussions regarding the rating of any entity.