Rating agency Crisil has downgraded a majority of diamond processing companies on declining earnings outlook for the current financial year. The demand for diamond jewellery has taken a knock across the globe. Exports to the US, the world's biggest market for diamond jewellery, have been lacklustre, impacting the earnings of export-oriented companies in the country.
Crisil has downgraded its rating on bank facilities of diamond processing company S Narendra to ‘P4’ from ‘P3’. This reflects the challenging operating environment faced by the cut and polished diamond player which will keep the company's sales volumes and profitability under pressure. The decline in accruals, coupled with the risk of loss on inventory, is expected to affect the company’s debt and its already weak financial risk profile.
The rating continues to reflect the strong experience and conservative risk appetite of the company's promoters. The company gets an assured supply of rough diamonds from group company Sauraj Diamonds.
The agency has also downgraded its rating on Rosy Blue's (RBIL) bank facilities to ‘BBB/ Negative/P3+’ from ‘BBB+/Stable/P2’, which reflects that the company’s profitability may remain under pressure. It believes that the decline in accruals during the current financial year, coupled with the risk of loss on inventory, is expected to lead to deterioration in the company’s debt protection measures. The company in a recent e-mail reply has divulged its diversification plans.
Despite Kama-Schachter Jewellery enjoying a sound business risk profile, its bank facilities have been downgraded to ‘BBB+/Negative/P2’ from ‘A-/Stable/P2+’. The rating reflects that Kama Jewellery’s credit risk profile may remain under pressure in the near term.
Fine Jewellery Manufacturing (FJML) has also been rated down to ‘BB/Negative/P4’ from ‘BBB+/Stable/P2’. This reflects FJML’s stretched liquidity because of significant delays in receivables from exports.
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Other companies that have been downgraded include Mohit Diamonds (P2 to P4), Shreeji Jewellery (P3+ to P4), Shreeji Jewellery Designs (P3+ to P4), M Suresh Jewellery (P2+ to P2) and D A Jhaveri(P3 to P4).