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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 13.00 | ACUITE BBB- | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 13.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long term rating at ‘ACUITE BBB-‘ (read as ACUITE triple B minus) on the Rs.13.00 crore bank facilities of Komal Exports. The outlook is ‘Stable’. Reason for reaffirmation The rating reaffirmation reflects strong rebound in sales in FY 2022, improvement in liquidity position, strong financial risk profile led by lower debt levels and absence of debt repayment obligation. Further, the operating income of the firm is expected to increase on account of established presence in domestic market. |
| About the Company |
| Komal Exports (KE) is a partnership firm, established in 2006 in Surat. The firm is promoted by Mr. Pravinbhai Jasoliya. The other partners are Mr. Hareshbhai Jasoliya, Mr. Hiteshbhai Jasoliya, Mr. Keshavbhai Jasoliya and Mr. Hardik Jasoliya. KE is engaged in import of rough diamond, processing and selling of Cut & Polished Diamonds of clarity SI1, SI2. In addition to this, the firm is also engaged in trading of rough diamonds from one source to other. The firm exports polished diamonds to countries such as Hong Kong, Belgium, New York, Thailand and UAE. In addition to this, KE also sells the same in domestic market; majorly in Mumbai. |
| Analytical Approach |
| Acuité has taken a standalone view of the business and financial risk profile of KE to arrive at the rating. |
Key Rating Drivers
| Strengths |
| Experience management The partners, Mr. Pravinbhai Jasoliya, Mr.Hareshbhai Jasoliya, Mr. Hiteshbhai Jasoliya, Mr. Keshavbhai Jasoliya and Mr. Hardik Jasoliya, have experience of more than a decade in the diamond industry. The extensive experiences of the partners have helped KE to secure orders from existing and new customers. Acuité believes that the firm will continue to benefit from the promoters' experience and established presence in improving its business risk profile over the medium term. Improvement in scale of operations Firm is engaged in manufacturing and sales of cut and polished diamonds and trading of rough diamonds. In FY 2022 firm reported revenue of Rs. 344.62 Cr and has exceeded Acuite’s projections by 91%. After witnessing decline in revenue in FY 2021 wherein operating income stood at Rs. 147.07 Cr, firm has registered growth of 134% in FY 2022 which was majorly driven by export of gems. Firm’s exports accounted for 7.34% of total revenues however the domestic customers to whom the firm sells are themselves engaged in export of gems and jewellery hence this contributed to sharp increase in revenues. Healthy financial risk profile Firm’s financial risk profile is healthy marked by moderate net worth and comfortable debt protection metrics. Tangible net worth as on 31 st March 2022 stood at Rs. 27.98 Cr as against Rs. 26.01 Cr in FY 2021. In FY 2022 after payment of income tax, partners have withdrawn Rs. 3.17 Cr from capital account. Total debt of Rs. 8.43 Cr in FY 2022 consists of Rs. 1.35 Cr of unsecured loans and Rs. 7.08 Cr of working capital borrowings. Debt to Equity ratio improved and stood at 0.30 times in FY 2022 as against 0.49 times in FY 2021. Improvement in gearing was result of decline in working capital borrowings. Interest Coverage Ratio has improved to 3.42 times in FY 2022 as against 2.38 times in FY 2021 while Debt to EBITDA has improved to 1.17 times in FY 2022 from 2.39 times in FY 2021. Since the company has no debt funded capex plan hence the financial risk profile is expected to remain healthy in the near term. |
| Weaknesses |
| Working capital intensive operations Firm has shown improvement in working capital operations wherein the GCA days have moderated from 178 days in FY 2021 to 104 days in FY 2022. The moderation is on account of decline in inventory holding and debtor realization period. Inventory holding period has moderated from 87 days in FY 2021 to 35 days in FY 2022 due to faster movement of goods as a result of improvement in sales. Debtor days have declined from 82 days in FY 2021 to 58 days in FY 2022. Creditor period stood at 80 days in FY 2022. As a result, bank limit utilization has remained comfortable at 40.09% for the period between February 2022 to August 2022. Susceptibility of its profitability margins to volatility in diamond prices and fluctuation in forex rates KE operates in highly competitive and fragmented industry characterized by large number of unorganized players, there by affecting margins. Further, as KE is also engaged in export, it is also vulnerable to fluctuation in foreign exchange rates. Risk of capital withdrawal The firm is exposed to the risk of capital withdrawal considering its partnership constitution. Any significant withdrawal from the partner’s capital will have a negative bearing on the financial risk profile of the firm. |
| Rating Sensitivities |
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| Material covenants |
| None. |
| Liquidity Position |
| Adequate |
| Firm has adequate liquidity reflected by sufficient net cash accruals of Rs. 5.11crore during FY 2022. The firm is expected to generate cash accruals in the range of Rs. 4.43 – 4.54 crore over the medium term. The firm does not have any external term loan, hence, there exist no repayment obligations. The average bank limit utilization stood comfortable at 40.09% for the period between February 2022 to August 2022. Unencumbered bank and cash balance stood at Rs. 5.79 Cr. Rs. 1.5 Cr of Fixed deposit investment is lien marked. |
| Outlook: Stable |
| Acuité believes that the company will continue to maintain a ‘Stable’ outlook over near to medium term owing to its established market position and experienced management. The outlook may be revised to ‘Positive’ in case the company achieves higher than expected growth in revenues and improvement in profitability level and margin, working capital management and debt protection metrics. Conversely, the outlook may be revised to ‘Negative’ in case of a significant decline in revenues and operating profit margins, or deterioration in the capital structure and liquidity position on account of higher-than expected working capital requirements. |
| Other Factors affecting Rating |
| None. |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 344.62 | 147.07 |
| PAT | Rs. Cr. | 4.81 | 2.77 |
| PAT Margin | (%) | 1.40 | 1.88 |
| Total Debt/Tangible Net Worth | Times | 0.30 | 0.49 |
| PBDIT/Interest | Times | 3.42 | 2.38 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any other information |
| None. |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Entities In Manufacturing Sector:- 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 |
| https://www.acuite.in/view-rating-criteria-55.htm |
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