Experienced management and an established market position with a strong brand presence:
Waman Hari Pethe Sons Private Limited (WHPS) is among the leading gold jewellery retail chains in Maharashtra. The brand ‘Waman Hari Pethe’ has a history of more than 100 years and enjoys strong patronage, especially among the Maharashtrian community. Mr. Subodh Pethe, a member of the promoter family, along with his wife, Mrs. Sonali Pethe, operate a chain of 10 stores under the name ’WHPS’ spread across Mumbai, the Mumbai Metropolitan Region, Thane district, Pune, Solapur, Raigad, and Aurangabad. The company owns six out of these 10 stores, and the balance is on lease. Mr. Subodh Pethe has been managing the business operations for three decades and is ably supported by the second line of management. WHPS is well supported by a dedicated team of professionals and has tie-ups with more than 200 artisans. WHPS specialises in Maharashtrian gold and studded jewellery such as ‘Mangalsutra’, ‘Bajubandh’, and ‘Pichodi," among other products. Mr. Subodh Pethe has recently been awarded a patent for light-weight jewellery, a segment that is expected to exhibit steady growth over the near to medium term. Besides plain gold jewellery, the company also has an established presence in diamond-studded jewellery in tune with changing consumer preferences.

Acuité believes that the company will continue to benefit from WHPS‘s strong brand equity, wide network of stores across Maharashtra, and the promoter’s demonstrated ability to adapt to changing consumer tastes and preferences.

Stable operating performance
The operating performance of the company remains stable, as the revenue of the company stood at Rs.788.80 crore in FY2023 (Prov), registering a growth of 10 percent YoY compared to a revenue of Rs.716.51 crore in FY2022. The operating profit margin of the company stood at 4.97% for FY2023 (prov.) as against 4.68% for FY2022. The PAT margin stood at 1.57% for FY2023 (prov.) as against 1.01% for FY2022.

Moderate financial risk profile
The company has a moderate financial risk profile marked by moderate tangible net worth, moderate gearing, and moderate coverage ratios. The tangible net worth improved to Rs. 117.84 crore as of March 31, 2023 (prov.) as against Rs. 109.18 crore as of March 31, 2022, owing to accretion in reserves. The company follows a moderate leverage policy, as the gearing level of the company improved to 1.50 times as of March 31, 2023 (prov.) as against 2.86 times as of March 31, 2022. The adjusted debt-to-equity ratio (total debt minus FD-backed debt/total net worth) improved to 1.36 times as of March 31, 2023 (prov.) as against 1.77 times as of March 31, 2022. The improvement in gearing level is on account of the repayment of loans to the tune of Rs. 58.28 crore in FY 2023 and the change of working capital facilities to a gold metal loan from an FD-backed gold loan. The funds released from these gold-backed FDs were partly used towards paying off the long-term loans.

The coverage ratios of the company remained moderate, with an interest coverage ratio (ICR) of 2.04 times for FY2023 (prov.) against 1.66 times for FY2022. Also, the Debt Service Coverage Ratio (DSCR) stood at 1.83 times for FY2023 (prov.) against 1.52 times for FY2022. The ratio of total outside liabilities to tangible net worth (TOL/TNW) of the company improved to 1.82 times as of March 31, 2023 (prov.) against 3.18 times as of March 31, 2022.

Acuité believes that the financial risk profile is likely to improve in the near to medium term, led by a change in the debt profile on account of availing gold metal loans, thereby leading to efficient management of working capital borrowings.

Working capital-intensive nature of operations
The operations of the company are working capital intensive in nature, as marked by gross current asset (GCA) days of 117 days for FY2023 (prov.) as against 135 days for FY2022. The GCA days are driven by inventory levels; being in the retail jewellery segment, the company needs to maintain adequate inventory levels at its store. The inventory days stood at 117 days for FY2023 (prov.) compared to 134 days for FY2022. The average utilisation of the working capital limits of the company remained on the higher side at 92.15 percent in FY2023.

Intense competition and exposure to regulatory risk
Increased regulatory intervention in the form of bullion import restrictions, metal loan funding, mandatory PAN disclosure on transactions above a certain limit, and the imposition of taxes have adversely impacted the gold and jewellery industries. Besides, the introduction of the sovereign gold bond schemes will shift consumer preference away from physical gold. Additionally, gold jewellery retailing is a highly fragmented segment with the presence of large organised and numerous unorganised players, which limits its pricing flexibility and same-store revenue growth to an extent. However, the company’s presence since 1905 and strong brand value have enabled it to establish itself as a major player in Maharashtra over the years.