By Neelam Agrawal

India Ratings and Research (Ind-Ra) has assigned Firestar Diamond International Private Limited’s (FDIPL) working capital limits the following ratings:

- INR3,861m* fund-based working capital limits: assigned Long-term ‘IND A-(SO)’/Stable/Short-term ‘IND A2+(SO)’ 
- INR1,169m non-fund-based working capital limits: assigned Short-term ‘IND A2+(SO)’
- INR3,220m proposed working capital limits: assigned ‘Provisional IND A-(SO)’/Stable/‘Provisional IND A2+(SO)’

*includes INR90m convertible to non-fund-based


KEY RATING DRIVERS

The ratings are based solely on the unconditional, absolute and irrevocable guarantee provided by FDIPL’s parent company, Firestar International Private Limited (FIPL; ‘IND A-’/Stable/‘IND A2+’) for FDIPL’s working capital facilities. FIPL’s ratings are based on a consolidated view of its businesses and financials.


For the guarantor’s rating rationale, please click
here.


RATING SENSITIVITIES

Negative: A rating downgrade for the guarantor could be negative for the bank loan ratings.

Positive:
A rating upgrade for the guarantor could be positive for the bank loan ratings.

The revocation of the corporate guarantee would warrant a review of the bank loan ratings.


COMPANY PROFILE

FDIPL was incorporated in 2006 as a jewellery manufacturing company for exports. It became a wholly-owned subsidiary of FIPL in March 2016 (FY15: 67% held by FIPL). FDIPL’s export jewellery manufacturing facility caters to the wholesale diamond jewellery business and located is in Surat Special Economic Zone, whereas its retail jewellery designing and manufacturing unit is based in Kurla, Mumbai. FDIPL operates FIPL’s domestic retail business, which functions under the Nirav Modi brand. FDIPL is strategically important to FIPL as it is focussing on expanding its retail jewellery business.

For FY15, FDIPL reported revenue of INR15,494m, registering 4% yoy growth (FY14: 12%), driven by an increase in retail sales. Its EBITDA margins improved to 6.3% in FY15 (FY14: 4.9%),
operating EBITDA/gross interest coverage stood at 2.18x (2.56x) and adjusted net debt/EBITDAR stood at 3.43x (3.19x). Its working capital cycle remained stretched at 185 days in FY15 (FY14: 159 days), mainly due to higher inventory days, as the company stocked up additional inventory for its new retail store. For 9MFY16 the company reported revenues of INR14,435.6m and its working capital cycle stood at 173 days.




SOLICITATION DISCLOSURES

Additional information is available at www.indiaratings.co.in. The ratings above were solicited by, or on behalf of, the issuer, and therefore, India Ratings has been compensated for the provision of the ratings.

Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.

 

DISCLAIMER

ALL CREDIT RATINGS ASSIGNED BY INDIA RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.INDIARATINGS.CO.IN/RATING-DEFINITIONS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.INDIARATINGS.CO.IN. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. INDIA RATINGS’ CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE.

Applicable Criteria

Analyst Names

  • Primary Analyst

    Neelam Agrawal

    Analyst
    India Ratings and Research Pvt Ltd Wockhardt Towers, 4th Floor, West Wing, Bandra Kurla Complex, Bandra East,Mumbai - 400051
    +91 22 40356115

    Media Relation

    Mihir Mukherjee

    Manager Corporate Communications and Investor Relations
    +91 22 40356121