Rationale

The rating reaffirmation factors in an expectation of continuation of steady operational performance for Punjab Retail Private Limited (PRPL), aided by the extensive experience of its promoters in the gold jewellery retail business in Indore and Bhopal. Further, the rating considers the strong brand presence of the Punjab Jewels brand in the region and steady ramp-up of revenues from most of the stores over the years. ICRA also favourably factors in the robust financial risk profile of PRPL, as reflected by healthy improvement in the company’s operating income over the past few years (from Rs. 310 crore in FY2022 to Rs. 497 crore in FY2025), coupled with healthy operating margins. The debt coverage indicators remained strong, with interest coverage and TOL/TNW of 11.8 times and 0.2 times, respectively, in FY2025. Further, PRPL’s liquidity continues to be comfortable with adequate cushion in fund-based limits. In the near term, ICRA expects the company’s volume increase to remain muted, even as higher gold prices are likely to aid in revenue growth. The debt coverage indicators are anticipated to still be healthy, supported by negligible term debt, comfortable operating margins and lower utilisation of working capital limits. The rating, however, remains constrained by geographical concentration as all five of PRPL’s showrooms are located in Bhopal and Indore. Besides, the company continues to be exposed to regulatory risks arising from changes in Government policies. It faces intense competition in the industry from organised and unorganised players. The rating is further constrained by the high inventory levels maintained by the company, which result in working capital-intensive nature of operations. The Stable outlook on the rating reflects ICRA’s expectation that PRPL will continue to leverage its brand presence in Madhya Pradesh and record steady revenue growth. The same is likely to help the company maintain healthy credit metrics.