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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 359.52 | ACUITE A | Upgraded & Withdrawn | - |
| Bank Loan Ratings | 9.48 | Not Applicable | Withdrawn | - |
| Total Outstanding | 0.00 | - | - |
| Total Withdrawn | 369.00 | - | - |
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Rating Rationale |
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Acuité has upgraded and withdrawn its long-term rating to ‘ACUITE A’ (read as ACUITE A) from ACUITE BB+' (read as ACUITE Double B plus) on the Rs. 359.52 Cr. bank facilities of MARRI RETAIL PRIVATE LIMITED (ERSTWHILE J C BROTHERS RETAIL PRIVATE LIMITED).
Acuité has also withdrawn the long-term rating on the Rs. 9.48 Cr. bank facilities of MARRI RETAIL PRIVATE LIMITED (ERSTWHILE J C BROTHERS RETAIL PRIVATE LIMITED). The same is withdrawn without assigning any rating as it is a proposed facility. The withdrawal is on account of client's request and receipt of NOC from the lead banker. The withdrawal is in accordance with Acuité's policy on withdrawal of rating as applicable to the respective facility / instrument. Rationale for upgrade & withdrawal The rating upgrade & withdrawal takes into account a closely held, experienced family lineage in business with an established track record of operations and a consistent improvement in MRPL’s business risk profile marked by sustained growth in scale of operations and profitability. MRPL has reported revenue of Rs.1900.85 Cr. for FY2023, with a growth of 14.16 percent over FY2022 revenues of Rs.1665.10 Cr. Simultaneously, the operating profit margin improved to 7.90 percent in FY2023 from 5.85 percent in FY2022. Further, the company is estimated to achieve a revenue of Rs.2220.92 Cr. in FY2024, and margins are estimated to be in the range of 9.30 to 9.42 percent in FY2024. The financial risk profile improved in terms of interest coverage ratio (ICR) and debt service coverage ratio (DSCR), along with a better liquidity position in terms of higher net cash accruals vis-à-vis its debt obligations and efficient working capital management. The rating is, however, constrained by its exposure to intense competition in the retail trading industry coupled with the volatility of commodity prices |
| About the Company |
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MARRI RETAIL PRIVATE LIMITED (ERSTWHILE J C BROTHERS RETAIL PRIVATE LIMITED), was established as a partnership firm in 1998 by Mr. Marri Janardhan Reddy and his family members and later in 2008 converted to a ‘private limited’ company. It is engaged in the business of retail trade of textiles, ready-made garments, jewellery and silver items through several showrooms based all around the Telangana and Andhra state. It was initially started as a proprietary firm with a 1000 sq ft retailing ready-made garments in 1998 at Ameerpet, Hyderabad. Since then, the group has opened several outlets in prime locations of Hyderabad retailing into textile, ready-made garments and jewellery items. Further, the group categorizes its showrooms and brands as per the textile and jewellery division.
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| Unsupported Rating |
| Not applicable |
| Analytical Approach |
| For arriving at the ratings, Acuité has consider standalone the business and financial risk profiles of Marri Retail Private Limited (Formerly known as J.C. Brothers Retail private Limited) (MRPL). |
| Key Rating Drivers |
| Strengths |
MRPL was established in 1998 as a proprietary firm by Mr. Marri Janardhan Reddy, Mr. Marri Venkat Reddy, Ms. Marri Jamuna Rani, Ms. Marri Madhumathi, Mr. B. Narasimha Reddy. The promoters have experience in the retail trading segment of more than two decades. Through the extensive experience of the promoters, the group has ably managed to set up over 23 showrooms spread widely across Telangana and the AP region, with store names branded under “Jeans Corner," “The Chennai Shopping Mall," “Kanchipuram J S Babu Silks,” and “J C Brothers." Further, through their established track record of operations, the group has maintained healthy ties with its suppliers across India and has been able to create a wide range of products catering to different income categories through extensive promotions and advertisements spreading brand awareness, which resulted in a year-on-year sales growth of more than 20 percent through the last three years ending FY2024 (prov). To simplify the shareholder structure, Mr. Marri Venkat Reddy and his family now have complete control of MRPL. Under family arrangements, complete control was assumed by Marri Venkat Reddy, who was the key managerial personnel (KMP) for the last 10 years. Mr. Sashidhar Reddy, son of Marri Janardhan Reddy (founder of Marri Group), is inducted into the group as part of succession planning. Effective May 2022, MRPL has added the jewellery vertical to its business structure and is now actively engaged in the trading of jewellery and ornaments, thus increasing the efficiency of dual business lines under one company. A new CEO and experienced hires across departments have been induced, resulting in an improved business risk profile.
MRPL’s revenue grew to Rs.1900.85 Cr. in FY2023 from Rs.1665.10 Cr. in FY2022. Further, MRPL has sustained the growth momentum and is estimated to achieve a revenue of Rs.2217.10 Cr in FY2024, with an improvement in operating profit margins to ~9.42 percent in FY2024E, from 7.90 percent in FY2023 and 5.85 percent in FY2022. This growth is attributed to continuous store addition ,the quick revenue generation from the newly added stores due to their established presence and stable revenue generation from the existing stores.
The company’s financial risk profile is healthy marked by a healthy net worth, moderate gearing and healthy debt protection metrics. The net worth of the company stood at Rs.225.94 Cr. and Rs.202.57 Cr. as on March 31, 2023, and 2022, respectively. Further, it is estimated that net worth will be ~Rs. 340.93 Cr. in FY2024. The improvement in net worth is due to accretion of reserves. The gearing of the company has slightly deteriorated in FY2023. It stood at 1.17 times as on March 31, 2023, against 1.04 times as on March 31, 2022. The deterioration is on account of increase in long-term debt. Further, it is estimated that gearing will be at ~0.96 times in FY2024. Debt protection metrics: interest coverage ratio and debt service coverage ratio stood at 10.61 times and 4.38 times as on March 31, 2023, respectively, as against 8.49 times and 3.38 times as on March 31, 2022, respectively. TOL/TNW stood at 2.12 times and 2.41 times as on March 31, 2022, and 2021 respectively. The debt to EBITDA of the group stood at 1.48 times as on March 31, 2023, as against 2.16 times as on March 31, 2022. Further, it is estimated to be ~1.54 times in FY2024.
The working capital management of the company remained efficient, with GCA days at81 days as on March 31, 2023, as against 103 days as on March 31, 2022. The improvement in GCA days is on account of decrease in other current assets. Inventory days stood at 80 days as on March 31, 2023, as against 90 days as on March 31, 2022. The debtor's days stood at 4 days as on March 31, 2023, as against 1 days as on March 31, 2022. Subsequently, the payable period stood at 38 days as on March 31, 2023, as against 39 days as on March 31, 2022, respectively. Further, the average bank limit utilization in the last ten months ended March 2024 remained at ~60 percent for fund based working capital facilities.
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| Weaknesses |
MRPL currently operates with 27 showrooms based out of Telangana and Andhra Pradesh. However, these places are also flooded with other small and large players in the same line of business. It faces intense competition in terms of product quality and pricing, which leads to continuous pricing pressure, affecting its margins from peers, namely R.S. Brothers Group and Kalamandir Group, among others. The entry of branded textile players in Telangana is expected to intensify the competitive landscape for existing players like Marri Group. The non-textile segment also faces stiff competition from local players, which would limit the company’s ability to increase revenues significantly while maintaining margins. Over the medium term, the credit profile of the company will continue to be impacted by the geographical concentration of its stores in and around Telangana, coupled with increasing competition from other players. Marri Group, also dealing in jewellery items, shall additionally remain exposed to regulatory intervention such as compulsory hallmarking, the requirement of a permanent account number (PAN), etc.; a change in regulation of gold-related savings schemes coupled with changing consumer preferences, etc., which could impact the overall operating performance of the sector. Further, changes in metal prices would also impact the demand for gold, silver, etc. The sustainability or improvement in the margins shall remain susceptible to the improvement in realizations due to the rise in gold prices and the reduction in other operating overheads and expenses. Acuité believes that the group’s sustainability or improvement in operations will remain exposed to stiff competition, changes in regulations, and changes in the commodity’s prices over the near to medium term.
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| Rating Sensitivities |
| Not applicable |
| Liquidity Position: Adequate |
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The company’s liquidity is adequate, marked by adequate net cash accruals of Rs.129.52 Cr. in FY2023 as against its maturing long-term debt obligations of Rs.15.84 Cr. for the same period. The current ratio stood at 1.37 times as on March 31, 2023, against 1.27 times in the previous year. Unencumbered cash and bank balances stood at Rs. 1.76 Cr. as on March 31, 2023. MRPL is estimated to generate NCA of Rs. 149.86 Cr. in FY2024, as against repayment obligations of Rs. 26.44 Cr. Further, the average bank limit utilization in the last ten months ended March 2024 remained at ~60 percent for fund based.
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| Outlook: Not applicable |
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 1900.85 | 1665.10 |
| PAT | Rs. Cr. | 108.86 | 48.81 |
| PAT Margin | (%) | 5.73 | 2.93 |
| Total Debt/Tangible Net Worth | Times | 1.17 | 1.04 |
| PBDIT/Interest | Times | 10.61 | 8.49 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Trading Entities: https://www.acuite.in/view-rating-criteria-61.htm |
| Note on complexity levels of the rated instrument |
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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.
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