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India Ratings has affirmed Tribhovandas Bhimji Zaveri's (TBZ) national long-term rating at ‘IND BB+’ with a stable outlook. The agency has also affirmed the jewellery retailer’s Rs 24-crore fund-based limit at national long-term ‘IND BB+’ and national short-term ‘IND A4+’.
The ratings are constrained by the company’s stressed liquidity position as reflected by its almost fully utilised working capital limits over the 12 months ended July 2012. Its net cash conversion cycle has also remained high in the range of 95-134 days in the four years ended FY12 (year end March) due to a high inventory holding period, the agency has said.
The ratings are also limited by TBZ's geographic concentration (only one showroom in New Delhi), and low EBITDA margins of 4.24 per cent in FY12 (FY11: 4 per cent) due to the trading nature of business.
In FY12, the company’s revenue grew 25 per cent year on year to Rs 220 crore, mainly due to rising gold prices. The ratings derive comfort from TBZ's strong brand recall in the highly competitive domestic gems and jewellery industry, and its over century-long track record (since 1851).
The ratings also factor in volatile gold prices. However, the high marketability of gold lends some support to the company’s short-term liquidity position.
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