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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 16.20 | ACUITE BB- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 48.30 | - | ACUITE A4 | Reaffirmed |
| Total Outstanding | 64.50 | - | - |
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Rating Rationale |
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Acuité has reaffirmed its long-term rating of ‘ACUITE BB-’ (read as ACUITE double B minus) and short-term rating of ‘ACUITE A4’ (read as ACUITE A four) on the Rs. 64.50 crore bank facilities of Tanvirkumar and Co. The outlook is 'Stable'. Rationale for rating reaffirmation The rating reaffirmed takes into account the firm’s established track record of almost 4 decades in this line of business along with experienced promoters in the diamond industry. Further, the rating factors in the improvement in scale of operations Y-o-Y with a revenue recorded at FY 23 of Rs 249.25 Cr. against Rs 192.4 Cr. in FY 22 and Rs 100.53 Cr. in FY 21. However, the rating is constrained by average financial risk profile and stretched liquidity position of the firm with high reliance on short term bank borrowings with an average utilisation of 95-99% for last 12 months ended February 2024. Also, the firm operates with a working capital-intensive nature marked by high GCA days of 224 in FY23 and higher receivable cycle. The revenue achieve till February 2024 is Rs 234.56 Cr. |
| About the Company |
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Tanvirkumar and Co incorporated in 1976 is based in Andheri, Mumbai. The manufacturing unit is also located in MIDC, Andheri East, Mumbai. The firm is engaged in Trading in Cut & Polished Diamonds and Manufacturing of Studded diamond & Gold Jewellery. The firm is currently managed by Mr. Mihir Kamlesh Jhaveri, Mr. Milan Tanvir Chokshi, Mr. Nailesh Kirtilal Choksi and Mr. Shanay Nailesh Chokshi.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuite has considered the standalone business and financial risk profile of Tanvirkumar & Co. to arrive at the rating.
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| Key Rating Drivers |
| Strengths |
| Established business and reputed clientele in the Diamond Industry
Tanvirkumar & Co; formerly known as Milan jewellers has been in operation as a partnership firm since 1976. The firm is engaged in manufacturing and trading of polished diamonds and studded diamond & gold jewellery through its retail outlet; under the brand Moksh. The family has been into this business for over four decades and the average industry experience of the partners is around 20 years. The firm was set up by Mr. Tanvir Kirtilal Chokshi and Mr. Kamlesh Jhaveri. Currently, Mr. Milan Choksi, Mr Mihir Jhaveri, Mr Shanay Choksi, and Mr. Nilesh Choksi are the key partners. The key clientele for Tanvirkumar & Co are Tanishq, TBZ, Caratlane etc. Acuite believes that firm will continue to benefit from its established presence and track record along with a healthy relationship with reputed clienteles. Improvement in scale of operations Tanvirkumar & Co. is engaged in trading and manufacturing of polished diamonds and diamond studded jewellery. The firm deals with renowned jewellery brands and also operates its own brand “Moksh”. The firm generated a revenue of Rs. 249.25 crore in FY23 as against Rs. 192.4 crore in FY22; registering a growth of 29.55% YoY. The revenue primarily increased due to the increased demand in diamond industry post pandemic; crossing the pandemic revenue hurdle. Operating margin of the firm improved to 3.04% in FY23 as against 2.29% in FY22. The PAT margin of the firm stood at 0.78% as against 0.3% in FY22. Further, the firm has generated revenue of Rs.234.53 crores, operating margin of 3.73% and PAT margin of 0.91% upto February 2024. Acuite believes that scale of operations of the firm may continue to improve in medium term backed by its association with reputed clientele and more focus in jewellery business. |
| Weaknesses |
| Working Capital intensive operations
The operations of the firm are working capital intensive in nature marked by reducing yet high GCA days of 224 days in FY23 as against 250 days in FY22 and 459 days in FY21. The inventory days stand at 107 days in FY23 as against 103 days in FY22 and the debtor days stand at 112 days in FY23 as against 141 days in FY22. The creditor days increased to 105 days in FY23 as against 82 days in FY22. The firm’s reliance on working capital borrowings is on a higher side marked by high utilization of working capital limits at 95-99 percent during the last twelve months period ended February 2024. Acuité believes the firm's ability to restrict further elongation in working capital cycle will be a key rating sensitivity. Average Financial Risk Profile Tanvirkumar & Co. has average financial risk profile marked by tangible net worth of Rs. 34.95 crore as on FY23 as against Rs.35.73 crore as on FY22. The firm follows a moderate leverage policy as reflected in its gearing level of 1.76 times as on FY023 as against 1.70 times as on FY22. The total debt outstanding of Rs.61.57 crore consists of working capital borrowings of Rs. 47.45 crore, unsecured loan from promoters of Rs. 6.19 crore and Covid term loan obligations of Rs. 7.93 crore as on FY23. The coverage ratios of the firm improved marginally with Interest Coverage Ratio (ICR) of 1.85 times for FY23 against 1.48 times for FY22. Also, the Debt Service Coverage Ratio (DSCR) stood at 1.60 times for FY23 as against 1.36 times for FY22. In medium term DSCR is expected to be around 1 time. The total outside liabilities to tangible net worth (TOL/TNW) of the firm stood at 3.63 times as on FY23 as against 2.86 times as on FY22. Further, Net Cash Accruals to Total Debt (NCA/TD) stood at 0.04 times for FY23 as against 0.02 times for FY22. Acuite believes that financial risk profile may continue to remain average with higher reliance on bank borrowings coupled by low margins. |
| Rating Sensitivities |
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Ability to improve its scale of operations along with profitability.
Any further elongation in its working capital cycle leading to further stretch in liquidity. |
| Liquidity Position |
| Stretched |
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Tanvirkumar & Co has stretched liquidity position marked by high utilization of working capital limits of 95-99 percent during the last twelve months period ended February’24. However, the net cash accruals are Rs. 2.51 crores as against debt obligations of Rs. 2.08 crore for FY23. In addition, it is expected to generate sufficient cash accrual in the range of Rs. 3.3-3.6 crore against the maturing repayment obligations of Rs. 1-4 crore over the medium term. Furthermore, the firm maintains cash and bank balances of Rs.0.30 crore as on March 31, 2023, and the current ratio also stood at 1.34 times as on FY23, as against 1.49 times as on FY22.
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| Outlook: Stable |
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Acuité believes that Tanvirkumar & Co will maintain a 'Stable' outlook in the near to medium term on account of its extensive management experience and established track record of operations. The outlook may be revised to 'Positive' if the company registers higher-than expected growth in revenues, profitability margins and net cash accruals while maintaining/improving its debt protection metrics and financial risk profile. The outlook may be revised to 'Negative' in case the company registers substantial decline in revenues or profitability margins or if the financial risk profile deteriorates due to higher than expected working capital requirements resulting in deterioration of the capital structure.
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| Other Factors affecting Rating |
| None. |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 249.25 | 192.40 |
| PAT | Rs. Cr. | 1.95 | 0.59 |
| PAT Margin | (%) | 0.78 | 0.30 |
| Total Debt/Tangible Net Worth | Times | 1.76 | 1.70 |
| PBDIT/Interest | Times | 1.85 | 1.48 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not Applicable.
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| 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 • Trading Entitie: https://www.acuite.in/view-rating-criteria-61.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.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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