Rationale

 The assigned rating factors in the steady operational performance of Manepally Jewellers Private Limited (MJPL), aided by its established brand and extensive experience of the promoters in its area of operations in the jewellery retail business. The company has recorded healthy growth in revenues over the years (Rs. 1,132 crore in FY2025), supported by the addition of new stores as well as a rise in gold prices. In the current fiscal, even as volumes are expected to decline on account of rising gold prices, the company is likely to report around 20% growth in revenues, led by higher gold prices. The company’s liquidity position remains adequate, supported by timely enhancements from the banks to support its scale of operations. Additionally, the company has been extended metal loans by its promoters to help meet its working capital requirements. The operating margins for the company have seen an improvement in the past two years owing to the rise in gold prices as well as better absorption of fixed overheads. The margins in the current fiscal have further improved to around 8.9% in 10M FY2026 (vis-à-vis 4.1% in FY2025). Consequently, the company’s debt coverage indicators have also materially improved (interest coverage of around 5 times expected in FY2026). The financial profile is expected to remain steady going forward on the back of expected revenue growth driven by new store launches, coupled with improvement in margins, thereby strengthening MJPL’s debt coverage metrics. The rating, however, remains constrained by the geographical concentration of the company’s revenues in Telangana. ICRA notes that the company’s plans to venture into new states are expected to reduce the geographical concentration risk to an extent. The rating also factors in the intense competition and fragmented industry structure, which are likely to keep margins under check. ICRA also notes the inherent regulatory risks in the industry, which have impacted retailers’ performance in the past. The rating is further constrained by the working capital-intensive nature of operations. ICRA notes that the company has capex plans to open three new stores for gold jewellery and 10-20 stores exclusively for silver and lab-grown diamonds over the near to medium term. The funding requirement for the expansion and the funding mix for the same will remain monitorable. The Stable outlook reflects ICRA’s expectation that MJPL’s scale will steadily increase on the back of new store additions and profits will be supported by rising gold prices as well as better absorption of overheads. This is likely to help the company maintain its credit metrics commensurate with the rating level.