Subir Diamonds with outlook Stable IND B rating
India Ratings and Research (Ind-Ra) has affirmed Subir Diamonds Pvt Ltd.’s (SDPL) Long-Term Issuer Rating at IND B. The Outlook is Stable.
The affirmation reflects SDPL’s continued small scale of operations with revenue declining to INR740 million, according to the provisional financials for FY20 (FY19:INR938 million). The revenue fell in FY20 due to a significant decline in demand in the last quarter due to the COVID-19 outbreak leading to decline export sales to China and European countries.
The ratings continue to constrained by SDPL's modest EBITDA margins even though they turned positive at 0.8% in FY20 (FY19: negative 0.1%) due to the changes in the price of diamond imports. The company’s profitability remains susceptible to volatility in diamond prices and fluctuations in foreign exchange rates. The return on capital employed was 4% in FY20 (FY19: negative 1%).
The company’s credit metrics remained weak despite interest coverage (operating EBITDA/gross interest expense) turning positive at 1.6x in FY20 (FY19: negative 0.2x) and net leverage (adjusted net debt/operating EBITDAR) coming in at 3.7x (negative 14.3x). The recovery of the credit metrics in FY20 was due to a rise in the absolute EBITDA to INR5.78 million (FY19: negative INR0.65 million).
Liquidity Indicator – Stretched: SDPL’s cash flow from operations continued to negative at INR12.08 million (FY19: negative INR55.02 million). The company’s average maximum utilisation of fund-based facilities in the 12 months ended May 2020 was comfortable at 62.7% and the cash balance at end-March 2020 was INR33.32 million, including unrestricted fixed deposit. Furthermore, the issuer has not availed the Reserve Bank of India-prescribed moratorium from its banker and has been paying the interest timely till date.
The ratings continue to derive comfort from the directors’ experience of over three decades in the diamond business. Incorporated in 1982, SDPL is a private limited company with a registered office in Mumbai. It manufactures round cut diamonds and imports polishes and exports rough diamonds.
Key: diamond firm rating, diamond stable rating, SDPL rating
