By Neelam Agrawal

India Ratings and Research (Ind-Ra) has affirmed ratings on working capital facilities guaranteed by Firestar International Private Limited (FIPL, ‘IND A-’/Stable) and availed by Firestar Diamond FZE (FDFZE), and assigned ratings to the proposed working capital facilities as under:

Instrument Type

Date of Issuance

Coupon Rate

Maturity Date

Size of Issue (million)

Rating/Outlook

Rating Action

Fund-based working capital facilities

-

-

-

USD111 (increased from USD109)

IND A-(SO)/Stable/IND A2+(SO)

Affirmed

Proposed working capital facilities*

-

-

-

USD14

Provisional IND A-(SO)/Stable/Provisional IND A2+(SO)

Assigned

* The ratings are provisional and shall be confirmed upon the sanction and execution of loan documents for the above facilities by FIPL to the satisfaction of Ind-Ra.

KEY RATING DRIVERS

The ratings are based solely on the unconditional and irrevocable guarantee provided by FDFZE’s ultimate parent company, FIPL for the former’s working capital facilities. FIPL’s ratings are based on a consolidated view of its businesses and financials. Being the second largest contributor to FIPL’s revenue (FY16: about 25%, FY15: around 26%), FDFZE is strategically important to the parent.

 

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


RATING SENSITIVITIES

Negative: The following could lead to a negative rating action:

 - A rating downgrade for the guarantor; and/or

 - Weakening of linkages with the parent

 

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


COMPANY PROFILE

Headquartered in Dubai, FDFZE is a wholly-owned subsidiary of Firestar Holdings Ltd, Hong Kong, which is 100%, held by FIPL. Established in 2009, FDFZE’s core business activity involves trading of cut and polished diamonds (99% of revenue in FY16). The company is also engaged in trading of diamond studded jewellery. In FY16, it reported revenue of USD474.5 million (FY15: USD444 million), EBITDA margin of 8.5% (8.0%), EBITDA/gross interest coverage of 5.8x (5.1x) and adjusted net debt/EBITDA of 1.1x (1.6x). In 1HFY16, FDFZE’s revenue was USD225.5 million and EBITDA margin was around 9%. Its maximum average use of fund-based facilities for the 12 months ended November 2016 was 76%.


RATING HISTORY

Instrument Type

Current Rating/Outlook

Historical Rating/Outlook

Rating Type

Outstanding Limits (million)

Rating

13 April 2016

Fund-based working capital facilities

Long-term/ Short-term

USD111

IND A-(SO)/Stable/IND A2+(SO)

IND A-(SO)/Stable/IND A2+(SO)

Proposed working capital facilities

Long-term/ Short-term

USD14

Provisional IND A-(SO)/Stable/Provisional IND A2+(SO)

-


COMPLEXITY LEVEL OF INSTRUMENTS

Bank facilities are instruments with low complexity levels, where the relationship between the inherent risk factors and intrinsic return characteristics is straightforward.

 

For more information, visit https://www.indiaratings.co.in/complexity-indicators

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.

ABOUT INDIA RATINGS AND RESEARCH

India Ratings and Research (Ind-Ra) is India's most respected credit rating agency committed to providing India's credit markets accurate, timely and prospective credit opinions. Built on a foundation of independent thinking, rigorous analytics, and an open and balanced approach towards credit research, Ind-Ra has grown rapidly during the past decade, gaining significant market presence in India's fixed income market. 

Ind-Ra currently maintains coverage of corporate issuers, financial institutions (including banks and insurance companies), finance and leasing companies, managed funds, urban local bodies and project finance companies. 

Headquartered in Mumbai, Ind-Ra has six branch offices located in Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad and Kolkata. Ind-Ra is recognised by the Securities and Exchange Board of India, the Reserve Bank of India and National Housing Bank. 

India Ratings is a 100% owned subsidiary of the Fitch Group.

For more information, visit www.indiaratings.co.in.

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