April 20, 2023

Kalyan Jewellers India Limited: Ratings reaffirmed for bank facilities; rating reaffirmed
and withdrawn for fixed deposits programme
Summary of rating action

Previous Rated Amount Current Rated Amount

Instrument* Rating Action
(Rs. crore) (Rs. crore)
Long-term/short-term fund-based [ICRA]A+(Stable)/[ICRA]A1;
2,493.00 2,493.00
– working capital facilities reaffirmed
Short-term fund-based/non-fund
(1,663.00) (1,663.00) [ICRA]A1; reaffirmed
based (sub-limits)
Long-term – Unallocated limits 537.00 537.00 [ICRA]A+(Stable); reaffirmed
Long-term – Fixed Deposits [ICRA]A+(Stable); reaffirmed and
525.00 -
Programme withdrawn
Total 3,555.00 3,030.00

*Instrument details are provided in Annexure-I

Rationale

ICRA has taken a consolidated view of Kalyan Jewellers India Limited (KJIL), which includes its subsidiaries and step-down
subsidiaries, while assigning the credit ratings, given the common management and significant operational and financial
linkages between them.
The ratings reaffirmation reflects the healthy operating performance of KJIL in 9M FY2023 and ICRA’s expectations of a
sustained performance over the medium term. The same is supported by KJIL’s expanding retail network, strong brand equity
and industry tailwinds in the form of shifting market share in favour of organised jewellery retailers, accelerated by favourable
Government policies, including mandatory hallmarking of gold jewellery. KJIL recorded a healthy revenue growth of ~34% YoY
at ~Rs. 10,690 crore in 9M FY2023 (unaudited), albeit on a low base which was impacted by the pandemic-induced lockdowns
last year, with operating margins sustaining at ~8%. The Middle East business, which remained under pressure over the last
two years, recorded a healthy revenue growth of ~68% YoY in H1 FY2023, reflecting a revival in operations. ICRA expects KJIL’s
revenue to continue to grow by ~10% p.a. on the back of planned store openings over the medium term with economies of
scale and improving product mix supporting its margins.

The ratings continue to favourably factor in the company’s large scale of operations and strong market position, aided by its
established brand name along with a track record of over three decades in the jewellery retail industry. KJIL’s healthy
geographical diversity of revenue and share of studded jewellery in the product mix put it among the top players in the
industry. The increasing adoption of the franchisee model (KJIL has opened 16 franchisee stores in FY2023) in its retail
expansion is likely to reduce the capital requirements, going forward. ICRA also derives comfort from the high corporate
governance standards of the company, underpinned by more than 50% independent and reputed independent board
members.
The ratings, however, continue to remain constrained by the moderate coverage metrics and return indicators, limited by the
high working capital requirements in the business and modest inventory turnover. While KJIL’s interest cover, net TOL1/TNW
and net TOL/Inventory improved to 3.7 times, 1.6 times and 87%, respectively, in H1 FY2023, the metrics remained below the
rating levels. ICRA expects KJIL’s credit metrics to improve over the medium term with limited incremental capital
requirements due to adoption of the franchisee model, along with economies of scale. The ratings also consider the intense

1
Total outside liabilities adjusted for cash and liquid investments

www.icra .in
Page | 1
 competition, which limits pricing flexibility, coupled with exposure to volatile gold prices and regulatory risks, which have
impacted the retailers’ performance in the past.
ICRA has withdrawn the [ICRA]A+(Stable) rating assigned to the fixed deposits (FD) programme of KJIL on the basis of
withdrawal request received from the company along with a confirmation that no amount was outstanding against the FD as
on the date of the request for withdrawal of the rating.
The Stable outlook on the long-term rating reflects ICRA’s expectations that the company’s operating and financial
performances will continue to benefit from its strong market position and favourable demand conditions along with improving
business diversification and capital structure.

Key rating drivers and their description

Credit strengths

Established market position with healthy scale of operations – KJIL is one of India’s largest jewellery retailers and enjoys a
strong brand name of Kalyan across the market. Its healthy scale of operations, characterised by more than Rs. 10,000 crore
in revenue from operations (in FY2022) and a pan-India retail network comprising 147 showrooms across India, 33 showrooms
across the Middle East and two showrooms for Candere as on March 31, 2023, benefit the company in terms of economies of
scale and enable it to survive periods of business downturns.

Improving geographical and product diversification – KJIL has a diversified business presence with 45% of its revenue derived
from non-South India and the Middle East markets in FY2022. The company has been diversifying geographically to non-South
India markets over the last five years, resulting in its share of revenue increasing to 30% in FY2022 from 23% in FY2017. KJIL’s
product diversity has also improved with the share of margin-accretive studded and diamond jewellery increasing to ~24%
(India) in FY2022 from ~20% (India) in FY2017. This is expected to increase further over the medium term with KJIL’s deeper
penetration into non-South markets, which display higher demand for studded jewellery.

Experience and track record of promoters and management – KJIL’s promoters have a vast experience in the gold jewellery
industry for three decades. Further, the presence of Highdell Investments Limited (Warburg Pincus Group) and reputed
independent directors on the board, complimented by a professional management team, provides additional comfort on
systems and governance.

Favourable industry growth prospects – Increasing regulatory restrictions in the jewellery segment, aimed towards greater
transparency and higher compliance costs have been resulting in the shifting of market share in favour of the organised
jewellery retailers. This is likely to be an advantage for KJIL due to its pan-India presence and brand equity. ICRA expects KJIL
to continue to increase its revenue base while riding the industry tailwinds over the medium term, supported by a loyal
customer base and an extensive ‘My Kalyan’ network of stores.

Credit challenges

Moderate coverage metrics – KJIL’s coverage metrics remain at moderate levels with an interest cover of 3.9 times in 9M
FY2023. While the geographical diversification contributed to improvement in the company’s revenue from margin-accretive
studded jewellery, the rapid expansion of its retail network resulted in the need for increased inventory-stocking, thus
impacting its inventory turnover, which remains low compared to industry figures. Nevertheless, KJIL’s credit metrics have
improved year-on-year and are likely to improve with the expected improvement in the inventory turnover and earnings in
the coming quarters with limited incremental capital requirements for expansion with the adoption of the franchisee model.

Intense competition and exposure to regulatory risks – The domestic jewellery sector continues to be exposed to the risks
arising from the evolving regulatory landscape, which could have an adverse impact on the business. Restriction on bullion
imports and metal loan funding, mandatory PAN disclosure on transactions above a threshold limit and imposition of excise
duty are some of the regulations that have impacted business prospects in the past. KJIL remains exposed to changes in

www.icra .in
Page | 2
 regulations that may impact its business profile. Further, the jewellery retail business is highly fragmented and is exposed to
intense competition from organised and unorganised players. This limits the pricing flexibility enjoyed by retailers to an extent.

Environmental and social risks

Environmental considerations – Exposure to environmental risks remains low for entities in the jewellery retail industry. Few
issues of concern include episodes of excessive rainfall/flooding in the operating regions impacting its jewellery stores, as
recorded in the past. Additionally, indirect risk of rural demand for jewellery moderating during periods of crop loss caused by
physical climate change or otherwise also pose risks to revenue growth and profitability.

Social considerations – Exposure to social risks remains moderate for entities in the jewellery retail industry. The sector has
witnessed increased focus on product quality and transparency in pricing that has supported consumer confidence. Yet, the
industry participants remain exposed to changes in consumer behaviour including, among other things, a shift towards less
gold-intensive daily/fashion jewellery. Additionally, with a relatively higher requirement of workforce for store operations and
jewellery manufacturing, the level of wages and associated fixed costs could weigh on margins, given the skilled nature of
work.

Liquidity position: Adequate

KJIL’s liquidity position remains adequate, supported by steady earnings from operations coupled with unutilised lines of credit
and adequate free cash balances. Cash buffer, including free cash reserves, liquid investments and unutilised working capital
limits stood at ~Rs. 440 crore as on March 31, 2022. The average utilisation of its fund-based limits over the last 12 months
ending August 31, 2022 stood at 94%. KJIL is expected to generate adequate cash flow from operations to meet its funding
requirements towards capital expenditure of ~Rs. 120 crore along with scheduled debt repayment obligations of ~Rs. 135 crore
(including repayment of lease liabilities). The incremental working capital requirements to support the expansion are expected
to be funded through internal accruals.

Rating sensitivities

Positive factors – The ratings may be upgraded if the company registers a sustained healthy growth in revenue and earnings
along with higher inventory turnover, resulting in an improvement in its credit metrics and return indicators. Specific credit
metrics that could result in ratings upgrade include Net TOL (adjusted for cash)/Inventory below 70% and an interest cover
above 5.0 times on a sustained basis.

Negative factors – Pressure on the ratings may arise if there is sustained pressure on the operating performance or a
deterioration in the working capital cycle, adversely impacting the coverage metrics and the liquidity position. Specific credit
metrics that could result in a ratings downgrade include Net TOL (adjusted for cash)/TNW exceeding 1.6 times on a sustained
basis.

Analytical approach

Analytical Approach Comments

Corporate Credit Rating Methodology
Rating Methodology – Gems & Jewellery (Retail)
Applicable rating methodologies
Rating Approach - Consolidation
Policy on withdrawal of credit ratings
Parent/Group support Not Applicable

For arriving at the ratings, ICRA has considered the consolidated financials of KJIL, as
Consolidation/Standalone
specified in Annexure - II

www.icra .in
Page | 3
 About the company

Kalyan Jewellers India Limited (KJIL), promoted by Mr. T.S. Kalyanaraman and his sons, is an established jewellery retailer in
India with a presence spanning more than three decades. The company operates through a pan-India retail network of 147
stores as on March 31, 2023 of which 76 were in South India and the remaining 71 in non-South India. The company entered
the Middle East market in December 2013 with six showrooms. It operated 33 showrooms in the Middle East, after closing
seven stores in FY2021, and two showrooms for Candere as on March 31, 2023. The global private equity fund, Warburg Pincus
(Highdell Investments Limited), holds a significant minority stake in the company. The company was listed on the Bombay
Stock Exchange and the National Stock Exchange of India in March 2021.

Key financial indicators (audited)

FY2021 FY2022 9M FY2023

KJIL Consolidated
(Audited) (Audited) (Unaudited)
Operating income 8,551 10,788 10,690
PAT -6 224 362
OPBDIT/OI 8.9% 7.9% 8.0%
PAT/OI -0.1% 2.1% 3.4%
Total outside liabilities/Tangible net worth (times) 2.1 1.8 -
Total debt/OPBDIT (times) 5.4 4.7 -
Interest coverage (times) 1.9 2.4 3.9
PAT: Profit after tax; OPBDIT: Operating profit before depreciation, interest, taxes and amortisation; Amount in Rs. Crore
Note: The KFIs are based on adjusted financial statements as per ICRA’s methodology

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

Rating history for past three years

Chronology of rating history

Current rating (FY2024)
for the past 3 years
Amount
Instrument Amount outstanding Date & rating Date & rating Date & rating
Date & rating in FY2023
Type rated as on Sep 30, in FY2024 in FY2022 in FY2021
(Rs. crore) 2022
(Rs. crore) Apr 20, 2023 Oct 28, 2022 Jun 03, 2022 Oct 28, 2021 Oct 26, 2020
Fund based – Long
[ICRA]A+ [ICRA]A+ [ICRA]A [ICRA]A [ICRA]A-
Working term/
1 2,493.00 - (Stable)/ (Stable)/ (Stable)/ (Stable)/ (Stable)/
capital short
[ICRA]A1 [ICRA]A1 [ICRA]A2+ [ICRA]A2+ [ICRA]A2+
facilities term
Fund based/
non-fund Short
2 (1,663.00) - [ICRA]A1 [ICRA]A1 [ICRA]A2+ [ICRA]A2+ [ICRA]A2+
based (sub- term
limits)
Long [ICRA]A [ICRA]A [ICRA]A-
3 Term Loans - - - -
term (Stable) (Stable) (Stable)
Unallocated Long [ICRA]A+ [ICRA]A+ [ICRA]A [ICRA]A
4 537.00 - -
Limits term (Stable) (Stable) (Stable) (Stable)
Fixed [ICRA]A+
Long [ICRA]A+ [ICRA]A
5 Deposits 525.00 - (Stable); MA(Stable) MA- (Stable)
term (Stable) (Stable)
Programme withdrawn

www.icra .in
Page | 4
 Complexity level of the rated instruments

Instrument Complexity Indicator

Long-term/Short-term fund based – Working capital facilities Simple
Short-term fund based/non-fund based (sub-limits) Simple
Long-term – Unallocated Limits N.A.
Fixed Deposits Programme Simple

The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated.
It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's
credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or
complexity related to the structural, transactional or legal aspects. Details on the complexity levels of the instruments are
available on ICRA’s website: Click Here

www.icra .in
Page | 5
 Annexure I: Instrument details

Date of Coupon Amount Rated

ISIN Instrument Name Maturity Current Rating and Outlook
Issuance Rate (Rs. crore)
NA Fund based – Working capital limits NA NA NA 2,493.00 [ICRA]A+(Stable)/[ICRA]A1
Fund based/non-fund based (sub-
NA NA NA NA (1,663.00) [ICRA]A1
limits)
NA Unallocated limits NA NA NA 537.00 [ICRA]A+(Stable)
[ICRA]A+(Stable);
NA Fixed deposits programme NA NA NA 525.00
withdrawn
Source: Company

Please click here to view details of lender-wise facilities rated by ICRA

Annexure II: List of entities considered for consolidated analysis

Consolidation
Company Name KJIL Ownership
Approach
Subsidiaries
Kalyan Jewellers FZE, UAE 100.00% Full Consolidation
Kalyan Jewellers, INC., USA 100.00% Full Consolidation
Enovate Lifestyles Private Limited 85.00% Full Consolidation
Step Down Subsidiaries
Kalyan Jewellers LLC, UAE 100.00% Full Consolidation
Kalyan Jewellers For Golden Jewelry Company, W.L.L., Kuwait 49.00% Full Consolidation
Kalyan Jewellers LLC, Qatar 49.00% Full Consolidation
Kalyan Jewellers LLC, Oman 70.00% Full Consolidation
Kenouz Al Sharq Gold Ind. LLC, UAE 49.00% Full Consolidation
Kalyan Jewellers Bahrain W.L.L. 49.00% Full Consolidation
Source: KJIL annual report FY2022
Note: ICRA has taken a consolidated view of the parent (KJIL), its subsidiaries and step-down subsidiaries while assigning the ratings.

www.icra .in
Page | 6
 ANALYST CONTACTS
Jayanta Roy Kaushik Das
+91 33 7150 1120 +91 33 7150 1104
jayanta@icraindia.com kaushikd@icraindia.com

Vipin Jindal Raunak Modi

+91 124 4545355 +91 22 6169 3368
vipin.jindal@icraindia.com raunak.modi@icraindia.com

RELATIONSHIP CONTACT
Jayanta Chatterjee
+91 80 4332 6401
jayantac@icraindia.com

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
communications@icraindia.com

Helpline for business queries

+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)

info@icraindia.com

About ICRA Limited:

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services
companies as an independent and professional investment Information and Credit Rating Agency.

Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company,
with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency
Moody’s Investors Service is ICRA’s largest shareholder.

For more information, visit www.icra.in

www.icra .in
Page | 7
ICRA Limited

Registered Office
B-710, Statesman House, 148, Barakhamba Road, New Delhi-110001
Tel: +91 11 23357940-45

Branches

© Copyright, 2023 ICRA Limited. All Rights Reserved.

Contents may be used freely with due acknowledgement to ICRA.
ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subject to a process of surveillance,
which may lead to revision in ratings. An ICRA rating is a symbolic indicator of ICRA’s current opinion on the relative capability of the issuer concerned to
timely service debts and obligations, with reference to the instrument rated. Please visit our website www.icra.in or contact any ICRA office for the latest
information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable,
including the rated issuer. ICRA however has not conducted any audit of the rated issuer or of the information provided by it. While reasonable care has been
taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, and ICRA in particular, makes no
representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. Also, ICRA or any of its group
companies may have provided services other than rating to the issuer rated. All information contained herein must be construed solely as statements of
opinion, and ICRA shall not be liable for any losses incurred by users from any use of this publication or its contents.