| Established track record of promoters in gems and jewellery industry
PG is promoted by Mumbai-based Jariwala family who possesses nearly two decades of experience in the gems and jewellery industry. The group is engaged in manufacturing of gold and diamond-studded jewellery. PG has established relationship with reputed clients of over a decade and caters to reputed clients including Titan Company Limited, Reliance Retail among others. Acuité expects PG to maintain its business risk profile going forward on account of its experienced promoters and established presence in the industry.
Stable operating performance albeit decline in the operating margins
Parth Group is engaged in the manufacturing of studded gold and diamond jewellery. The group’s revenue stood at Rs.47.90 crore in FY2022 as against revenue of Rs. 48.55 crore in FY2021 as against revenue of Rs.50.48 crore in FY2020. The revenues declined in FY2022 due to the decrease in the orders from Titan India Limited. However, the Group’s revenue stood at ~Rs.58.58 Crore in FY2023. The increase in the revenues of the company in FY23 is due to the healthy orders from Reliance Retails Limited and Shivbhoomi Infralogistics Private Limited. The Group’s EBITDA margin stood at 4.09 percent in FY2022 as against 5.28 percent in the previous year FY2021. The marginal decline in the EBITDA margins is due to the increase in the prices of raw materials. The PAT margins stood at 0.91 percent in FY2022 as against 0.69 percent in FY2021. Acuité believes that PG is likely to maintain the stable operations in medium term.
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| Average Financial risk profile
The Group’s financial risk profile is average marked by the tangible net worth of the group stood at Rs. 13.61 crore as on March 31, 2022 as against Rs. 13.17 crore as on March 31, 2021. The group’s gearing stood low at 0.89 times as on March 31, 2022, as against 0.96 times in the March 31, 2021. The total debt of Rs.12.07 crore as on March 31, 2022, consists of long-term borrowings of Rs.1.71 crore, unsecured loan of Rs.0.19 crore and short-term debt obligations of Rs.8.94 crore. The group has made additions to the long-term debt of Rs.1.15 crore in FY2022 for working capital purposes. The interest coverage ratio stood at 1.64 times in FY2022 as against 1.56 times in the previous year 2021. The DSCR stood below unity at 0.87 times in FY2022 as against 1.43 times in FY2021. Acuité believes that the ability of the Group to maintain and improve the financial risk profile will be a key rating sensitivity in medium term.
Intensive Working capital cycle
The operations of Parth Group are working capital intensive reflected by Gross Current Assets (GCA) of 279 days as on March 31, 2022, as against 249 days as on March 31, 2021. The inventory holding days stood at 186 days as on March 31, 2022, as against 170 days as on March 31, 2021. The average inventory holding period of the group is around 100 days. The inventory days are high as the company needs to stock up different types of jewellery samples. The debtor days stood at 75 days as on March 31, 2022, as against 63 days as on March 31, 2021. The average credit period allowed to the customers are around 60-90 days. The creditors days stood at 115 days as on March 31, 2022, as against 79 days as on March 31, 2021. The average creditor period received from the suppliers is around 45-60 days. Working capital requirement is funded through bank lines, the average utilisation of bank facilities is high at ~96 percent for 6 months ended as on March’2023. The company takes adhoc limits in the festive season, when the demand for the jewellery is high. Acuité believes that the ability of the Group to maintain the working capital operations will remain a key sensitivity in medium term.
Presence in highly competitive & fragmented industry with exposure to regulatory challenges
The country’s gems and jewellery sector is highly fragmented. The retail segment has high dominance of unorganized players, who enjoy around 70 per cent market share. While in case of the manufacturing segment, the dominance of unorganized players is even higher at around 90 per cent. Moreover, increased regulatory intervention such as gold hallmarking, requirement of PAN, etc. impact the demand-supply trend in the sector. Furthermore, the fluctuation in gold prices also impact the demand for gold.
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