PC Jeweller hits all-time low as CRISIL downgrades rating to default grade

CRISIL downgraded PC Jeweller's long term and short terms ratings to the bank loan facilities of the Company to CRISIL D.

Shares of PC Jeweller continued to trade under pressure and slipped 5 per cent to hit a fresh all-time low level of Rs 23.50 on the BSE on Tuesday, after rating agency CRISIL downgraded its long-term and short-term ratings to the company's bank loan facilities to CRISIL D. The instruments with this rating are in default or are expected to be in default soon, as per the rating agency.

The jewellery company's stock has thus fallen below its previous low of Rs 24.15 touched on August 23, 2019. In the past four trading days, it slipped 16 per cent, as compared to a 1 per cent decline in the S&P BSE Sensex.

As per the rating rationale, the downgrade in the rating factors in the instances of development of Letter of Credits (LC) and overutilization in working capital limits for more than 30 days. The same is reflective of the fact that the liquidity profile of the group has deteriorated in past few months on account of cash flow mismatches.

“The ratings reflect instances of LC devolvement and overutilization in working capital limits, large working capital requirement and the risk of unfavourable regulatory changes. These weaknesses are partially offset by PCJ group's strong market position in manufacturing and retailing gold and diamond jewellery and the above-average capital structure,” CRISIL said in press release dated December 6, 2019.

The company however, clarifies that Indian jewellery demand during Q2 at 101.6 tonnes was almost a third lower year-on-year due to weaker consumer sentiments and there was a decline of nearly 51 per cent in Indian bullion imports on quarter-on-quarter basis.

The situation has, however, changed with the onset of festive season from October, 2019 onwards. The cash flows have started and the company, by the end of November, has adjusted 90 per cent of the devolved Standby Letter of Credits (SBLCs). There is no further invocation of any SBLC, the firm said.

PC Jeweller's share price has tanked 86 per cent from its 52-week high level of Rs 168 touched on April 18, 2019. In comparison, the Sensex was up 3 per cent during the same period.