­Experienced management, established track record of operations and reputed clientele
SJIL has presence in Gems and Jewellery industry since 1992. The promoter and managing director of the company, Mr. Mahendra Chordia, has experience of more than two decades in industry. The promoter is well supported by a competent second line of management. Over the years, the promoters have built strong customer base, resulting in repeat orders and has also ventured into international markets. Owing to the industry experience of the promoters and a dedicated design team, SJIL has been able to have long term relations with large jewellery retailers such as Malabar Gold, Kalyan Jewellers, and Tribhovandas Bhimji Zaveri (TBZ). The company also exports jewellery to Dubai, USA, Singapore and UK.

Acuité believes that with its long track record of over two decades in the business and long standing relationship with its customers, the company will continue to benefit from its established market position over the medium term.

Improvement in revenues and stable margins 
The operating income has improved to Rs.841.19 crores in FY2022 as against Rs. 575.56 crores in FY2021.The Company has generated revenue of ~Rs.200 Cr in Q1FY2023. The improvement in revenue is attributable to addition of a new unit (branch) in FY2022.  The operating margins remained range bound, as it stood at 2.13 per cent in FY2022 against 2.33 per cent in FY2021. The PAT margins stood at 0.96 per cent in FY2022 against 1.05 per cent in FY2021.

Modest Financial risk profile
The financial risk profile of the company is modest marked by moderate net worth, gearing and coverage indicators. The tangible net worth of the company stood at Rs. 113.21 crore as on March 31, 2022, as against Rs.105.03 crore as on 31 March, 2021. The gearing and TOL/TNW remained stable at 1.11 times and 1.16 times respectively as on March 31, 2022, as against 1.11 times and 1.15 times as on 31 March 2021. The Total debt of Rs. 125.96 crores as on 31 March, 2022 consist of term loans of Rs.19.39 crores, and short term debt of Rs. 106.56 crores. The Debt protection metrics, interest coverage ratio and net cash accruals to total debt (NCA/TD) stood moderate at 2.59 times and 0.07 times, respectively, as on March 31, 2022, as against 2.31 times and 0.05 times, respectively, as on March 31, 2021. DSCR stood at 2.20 times as on March 31, 2022, as against 1.95 times in previous year. However, Debt/EBITDA stood high at 7.03 times as on March 31, 2022, as against 7.46 times as on March 31, 2021.

Acuité believes the financial risk profile of the company is expected to remain moderate in near to medium term backed by expected improvement in operating performance. However, incremental working capital requirements and high reliance on bank lines, marked by average utilisation ranging between 90-95 percent is likely to impact the financial risk profile over the medium term.

Intense competition, Susceptibility to volatility in raw material prices, and market demand along with exposure to real estate
The company has a presence in gems and jewellery industry which is characterised by a large number of organised and unorganised players and intense competition resulting in strain on margins. The business profile of SJIL is linked to level of discretionary spending of the consumers. Further, the company is exposed to volatility in gold and diamond prices. The raw material is procured from the domestic market. Though, the company hedges the fluctuation risk by purchasing gold through metal loans avaied from existing lenders and currency forwards, the revenues still remain susceptible to volatility in external price fluctuations. Further, SJIL has a wholly owned subsidiary named Swarnsarita Realty Private Limited (SRPL) engaged in real estate investment. SJIL had an investment as on March 31, 2022 of Rs.20.96 crore in SRPL in terms of equity capital and long term advances which exposes it to risks in real estate. However, any significant increase in loans and advances will remain a key rating sensitivity factor.