By Brazil Gonsalves

India Ratings and Research (Ind-Ra) has placed Firestar Diamond International Private Limited’s (FDIPL) bank facilities on Rating Watch Negative (RWN) as follows:

Instrument Type

Date of issuance

Coupon Rate

Maturity Date

Size of Issue (million)

Rating/Rating Watch

Rating Action

Fund-based working capital facilities

-

-

-

INR3,824

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

Placed on RWN

Non-fund-based working capital facilities

-

-

-

INR1,059

IND A2+(SO)/RWN

Placed on RWN

Proposed working capital facilities*

-

-

-

INR3,367

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

Placed on RWN

* 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 RWN reflects a similar rating action on FDIPL’s parent company, Firestar International Private Limited (FIPL; ‘IND A-/RWN), which has extended an unconditional, absolute and irrevocable guarantee towards the rated bank facilities. FIPL’s ratings are based on a consolidated view of its businesses and financials. 

Ind-Ra has placed FIPL’s ratings on RWN due to the uncertainty surrounding the potential impact on the bank credit to FIPL, which is related to companies/firms named by Punjab National Bank (PNB;
‘IND AAA’/Stable) as parties in a fraud. 

Press reports indicate that PNB has lodged an FIR with the Central Bureau of Investigation naming Solar Exports, Stellar diamonds and Diamonds R US, all companies of Nirav Modi group, for obtaining buyer’s credit from overseas branches of Indian banks on the basis of letters of undertakings fraudulently issued on behalf of PNB. 

Mr. Nirav Modi is the main shareholder and key person in the management of FIPL and the charges if proven could impact the bank credit to FIPL and consequently the business of FIPL and its group companies.


RATING SENSITIVITIES

FDIPL’s ratings will move in tandem with that of FIPL. The agency has sought meetings with the issuer’s representatives as well as the banks and would resolve the RWN after the extent of bank and regulatory action becomes clear. The RWN indicates that the ratings may be downgraded or affirmed.


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 is located in Surat Special Economic Zone and Jaipur, whereas its retail jewellery designing and manufacturing unit is based in Mumbai. FDIPL operates FIPL’s domestic retail business, which functions under the Nirav Modi brand. FDIPL is strategically important as FIPL maintains focus on expanding its retail presence.

FINANCIAL SUMMARY


Particulars

FY16

FY15

Revenue (INR million)

125,109

103,084

EBITDA (INR million)

7,302

5,842

EBITDA margin (%)

5.8

5.7

Interest coverage (x)

3.3

2.2

Net leverage (x)

4.3

5.0

Source: FIPL, Ind-Ra


RATING HISTORY

Instrument Type

Current Rating/Rating Watch

Historical Rating/Outlook

Rating Type

Rated Limits (million)

Rating

17 March 2017

Fund-based working capital facilities

Long-term/Short-term

INR3,824

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

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

Non-fund-based working capital facility

Short-term

INR1,059

IND A2+(SO)/RWN

IND A2+(SO)

Proposed working capital facility

Long-term/Short-term

INR3,367

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

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


COMPLEXITY LEVEL OF INSTRUMENTS

For details on complexity levels of the instruments, please 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, structured finance and project finance companies. 

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

Ind-Ra 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

    Brazil Gonsalves

    Senior Analyst
    India Ratings and Research Pvt Ltd Wockhardt Towers, 4th Floor, West Wing, Bandra Kurla Complex, Bandra East,Mumbai - 400051
    +91 22 40001764

    Media Relation

    Mihir Mukherjee

    Manager Corporate Communications and Investor Relations
    +91 22 40356121