Press Release

Hindustan Associates Private Limited

March 22, 2023

Facilities/Instruments Amount (₹ crore) Rating1 Rating Action

90.00
Long Term Bank Facilities CARE BBB-; Stable Reaffirmed
(Enhanced from 67.00)
Details of instruments/facilities in Annexure-1.

Rationale and key rating drivers

The ratings assigned to the bank facilities of Hindustan Associates Private Limited (HAPL) factors in the improvement in the
operational performance during FY22 (refers to period from April 01 to March 31) marked by ~22% growth in total operating
income year-on-year basis and improvement in PAT margin, satisfactory financial risk profile and liquidity position. The ratings
continue to factor in the extensive experience of the promoters in the jewellery business and the company’s long track record of
operations and association with established brand name of ‘Tanishq’ with diversified product offerings. The ratings are, however,
constrained by working capital cycle intensive operations, moderation in capital structure due to debt-funded unrelated capex
towards property leasing and land acquisition, low profitability margins on account of trading nature of business and presence in
a highly fragmented Gems & Jewellery (G&J) industry and susceptibility of income and margins to volatility in gold prices.

Rating sensitivities: Factors likely to lead to rating actions.

Positive factors
• Increase in TOI above Rs 300 crore with PBILDT margin above 7.5% without any adverse impact on ROCE on sustained
basis.
• Sustained improvement in cashflow from operations leading to better liquidity.
• Improvement in capital structure with overall gearing below 0.65x.
Negative factors
• Reduction in TOI leading to GCA below Rs 6.00 crores.
• Deterioration in coverage ratios marked by Total debt to GCA ratio of above 5x. and increase in the inventory days leading
to stretched liquidity.
• Any delay in lease agreement execution resulting in delayed receipt of lease rentals exerting pressure on business cash flows.

Analytical approach:
Standalone

Outlook: Stable
CARE Ratings believes that the entity shall sustain its moderate operational performance over the medium term. Furthermore,
improvement in cash accruals supported through lease rentals over the medium term shall support its liquidity profile.

Key strengths
Promoters’ extensive experience in the jewellery retail business: HAPL is a closely held business by the Siddiqui family.
The managing director of the company, Mr. Azmat Siddiqui having an experience of 20 years, looks after the overall management
of the company. Mr. Atif Siddiqui, the younger brother of Mr. Azmat Siddiqui ably supports in managing the operations of the
company. The other director Mrs. Ayesha Musheer Fareed (wife of Mr. Azmat Siddiqui) looks after the HR operations.

Established track record of operations: HAPL commenced its operations with a single store in Prayagraj on rental basis with
just 9 employees on premises of 1800 sq.ft. Currently the company is operating two stores on rental basis with 9000 sq. ft. area
in Prayagraj and 3000 sq. ft. area in Moradabad City in Western U.P. The store in Prayagraj is reportedly one of the largest
Tanishq stores in the Northern region and it is expected to be the major growth driver for HAPL in the ensuing years.

Well established brand of ‘Tanishq’: Tanishq has been in the jewellery business since 1994 and has established its presence
through 410 stores in 243 cities in India (as on February21, 2023). Tanishq is a well-established brand in India and HAPL is
leveraging on the brand name of ‘Tanishq’. The stores are managed by HAPL, while, Titan does the majority of marketing for its

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Complete definition of the ratings assigned are available at www.careedge.in and other CARE Ratings Ltd.’s publications

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products, HAPL also undertakes marketing activities to advertise their store locations for a better reach and to increase footfall.
HAPL can purchase stock only from Titan and sell at the stipulated margins decided by them.

Diversified range of product offerings: HAPL is a Tanishq franchisee; Tanishq offers diversified range of products including
gold, diamond, platinum, solitaire, coloured stones etc. Tanishq also has diversified its product range to cater to all customer
bases with price points starting from Rs.5000. The company also sells many Titan brands like Mia, Rivaah etc.

Improvement in total operational income with range bound profitability margins: The total operating income of HAPL
improved by ~22% to Rs. 272.15cr in FY22 (PY: Rs. 222.99 cr) mainly on account of pent-up demand post covid and positive
industry prospect. Going forward, for 9MFY23 (refers to April 01 to December 31), company has reported a TOI of Rs. 354.84 cr.
However, profitability has remained at similar levels. While PBILDT margin stood at 7.16% for FY22 (PY: 7.14%), PAT margin
improved to 4.00% (PY: 3.77%) owing to lower interest expense. Profitability of the company remains range bound on account
of pricing structure being decided by the franchise agreement. The profit earned by the company is the difference in the buying-
selling charges, plus making charges on jewellery (both decided by Tanishq) and generally range between 7–9%.

Key weaknesses
Moderation in capital structure albeit satisfactory financial risk profile: The financial risk profile of the company marked
by overall gearing ratio of 1.00x as on March 31, 2022 (PY: 0.73x) and interest coverage ratio of 5.60x for FY22 (PY: 4.31x) stood
at satisfactory levels. The company has availed additional term loans during the year for construction of shopping complex in
Prayagraj and purchase of land in Moradabad, resulting in moderation in capital structure of the company. The building is proposed
to be leased out to Shopper's stop as per the term sheet signed at a monthly lease rental of Rs.0.25 crore per month which is
expected to support the profitability and liquidity to some extent. The company is having a monthly debt repayment obligation of
Rs. 0.08 cr against the term loan taken by the company for construction of shopping complex. However, the land acquisition and
subsequent development can take a longer time which may exert pressure on the cash flows of the company during any downturn.
Further, the working capital limits of the company were also enhanced to Rs. 65 cr from Rs. 50cr in Oct-22. Improvement in
coverage ratio was on account of reduction in the interest cost and improved PBILDT in absolute terms.

Working capital intensive nature of operations: Working capital intensive nature of the business is an inherent characteristic
of the retail gems and jewellery industry. The operating cycle of HAPL increased to 86 days in FY22 (PY: 88 days) on account of
high inventory days from 85 days as on March 31, 2022 (PY: 86 days as on March 31, 2021). Being into retail business, HAPL
receives instant payment from the customers resulting in the average collection period of 3 days as on March 31, 2022 (PY: 2
days). The average creditor days as on March 31, 2022 stood at 2 days (PY: 0 days) as nominal credit period of upto 3 days is
being offered by Tanishq.

Gold price fluctuation risk: HAPL is engaged in jewellery retailing and their prices are correlated to international gold prices
and exchange rates. Therefore, any adverse change in the gold prices is likely to have an impact on HAPL’s revenues and margins.
In order to hedge against the gold price fluctuation, the company follows inventory replenishment policy by buying similar quantity
of gold jewellery which it sells on a day-to-day basis. Nonetheless, it remains exposed to movement in value of underlying
inventory maintained in the store.

High competition from organized and unorganized players: The Indian retail jewellery sector is fragmented and intensely
competitive with organized and unorganized players in the market. Jewellery retail is largely dominated by region specific closely
held family managed entities. Despite Tanishq being an established and dominant brand, it is exposed to intense competition
from some of the other regional players and local jewellers which has a bearing on business volumes and margins.

Liquidity: Adequate
The liquidity of the company is adequate marked by healthy cash accruals of Rs 12.67 crore in FY23 against repayment obligation
of Rs 0.95 crore in FY23. The company has adequate cash and bank balance of Rs 9.31 crore as on March 31, 2022 (PY: Rs 1.49
crore). The average utilization of working capital limits remains moderate at around 82% for trailing twelve months ending January
2023. The current ratio of the company remains moderate at 1.85x as on March 31, 2022.
The company has undertaken project for construction of shopping complex adjacent to store in Prayagraj for which land was
purchased by the company in FY12 for a consideration of Rs. 7.5 cr. Total cost of construction is estimated to be Rs. 12cr being
funded through a term loan of Rs. 7cr (already tied up and disbursed) and the balance from internal accruals. Estimated

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completion date is March 31, 2023. The company has already entered into an agreement with Shopper’s Stop Limited for a lease
period of 22 years and lease rentals of Rs. 3cr per annum. Being adjacent to the exiting store, company also expects an increase
in footfall in its jewellery store over the years. Further, company is in the process of purchasing land in Moradabad for Rs. 17.00
cr. within close proximity of its Moradabad store. Going forward, the company may shift its Moradabad operations to the new
location in next 3 years, but the plans are yet to be finalized. The debt repayment of the same is expected to be met through the
existing cash accruals of jewellery business which has already commenced from May 2022.

Applicable criteria
Policy on default recognition
Financial Ratios – Non financial Sector
Liquidity Analysis of Non-financial sector entities
Rating Outlook and Credit Watch
Retail

About the company and industry

Industry classification
Macro Economic Indicator Sector Industry Basic Industry
Consumer Discretionary Consumer Services Retailing Distributors
Hindustan Associates Private Limited (HAPL) was incorporated in the year 2005 as a franchisee of Tanishq. Tanishq is a brand of
the Titan Company which is promoted by the Tata Group in collaboration with the Tamil Nadu Industrial Development Corporation.
Tanishq is headquartered in Bengaluru, Karnataka. Tanishq has a pan Indian presence with 410 stores in 243 cities. HAPL is
operating two stores each in Prayagraj and Moradabad on rental basis. The company is solely dealing in Tanishq jewellery which
is being supplied by Titan itself under their pricing structure as per the franchise agreement.

Brief Financials (₹ crore) March 31, 2021 (A) March 31, 2022 (A) 9MFY23 (UA)
Total operating income 222.99 272.15 354.84
PBILDT 15.91 19.49 16.97
PAT 8.40 10.88 9.54
Overall gearing (times) 0.73 1.00 NA
Interest coverage (times) 4.44 5.60 4.61
A: Audited UA: Unaudited; NA: Not Available

Status of non-cooperation with previous CRA: Not applicable

Any other information: Not applicable

Rating history for last three years: Please refer Annexure-2

Covenants of rated instrument / facility: Detailed explanation of covenants of the rated instruments/facilities is given in
Annexure-3
Complexity level of various instruments rated: Annexure-4
Lender details: Annexure-5
Annexure-1: Details of instruments/facilities
Size of Rating Assigned
Name of the Date of Coupon Maturity
ISIN the Issue along with Rating
Instrument Issuance Rate (%) Date
(₹ crore) Outlook
Fund-based - LT-
Proposed fund - - - 9.55 CARE BBB-; Stable
based limits
Fund-based - LT-
- - Sept 2029 15.45 CARE BBB-; Stable
Term Loan
Fund-based - LT-
Working Capital - - - 65.00 CARE BBB-; Stable
Limits

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Annexure-2: Rating history for the last three years

Current Ratings Rating History
Date(s) Date(s)
Date(s) Date(s)
Name of the and and
Amount and and
Sr. No. Instrument/Ba Rating(s) Rating(s)
Type Outstandin Rating Rating(s) Rating(s)
nk Facilities assigned assigned
g (₹ crore) assigned in assigned in
in 2022- in 2019-
2021-2022 2020-2021
2023 2020
1)CARE BBB-
; Stable
Fund-based - LT- CARE 1)CARE BBB- (15-Mar-21)
1 Working Capital LT 65.00 BBB-; - ; Stable -
Limits Stable (04-Mar-22) 2)CARE
BB+; Stable
(04-Aug-20)
CARE 1)CARE BBB-
Fund-based - LT-
2 LT 15.45 BBB-; - ; Stable - -
Term Loan
Stable (04-Mar-22)
Fund-based - LT- CARE 1)CARE BBB-
3 Proposed fund LT 9.55 BBB-; - ; Stable - -
based limits Stable (04-Mar-22)

Annexure-3: Detailed explanation of covenants of the rated instruments/facilities- Not Applicable

Annexure-4: Complexity level of the various instruments rated

Sr. No. Name of the Instrument Complexity Level
1 Fund-based - LT-Proposed fund based limits Simple
2 Fund-based - LT-Term Loan Simple
3 Fund-based - LT-Working Capital Limits Simple

Annexure-5: Lender details

To view the lender wise details of bank facilities please click here

Note on the complexity levels of the rated instruments: CARE Ratings has classified instruments rated by it on the basis
of complexity. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any
clarifications.

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About us:
Established in 1993, CARE Ratings is one of the leading credit rating agencies in India. Registered under the Securities and
Exchange Board of India, it has been acknowledged as an External Credit Assessment Institution by the RBI. With an equitable
position in the Indian capital market, CARE Ratings provides a wide array of credit rating services that help corporates raise capital
and enable investors to make informed decisions. With an established track record of rating companies over almost three decades,
CARE Ratings follows a robust and transparent rating process that leverages its domain and analytical expertise, backed by the
methodologies congruent with the international best practices. CARE Ratings has played a pivotal role in developing bank debt
and capital market instruments, including commercial papers, corporate bonds and debentures, and structured credit.

Disclaimer:
The ratings issued by CARE Ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not recommendations to
sanction, renew, disburse, or recall the concerned bank facilities or to buy, sell, or hold any security. These ratings do not convey suitability or price for the investor.
The agency does not constitute an audit on the rated entity. CARE Ratings has based its ratings/outlook based on information obtained from reliable and credible
sources. CARE Ratings does not, however, guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions
and the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE Ratings have paid a credit rating fee,
based on the amount and type of bank facilities/instruments. CARE Ratings or its subsidiaries/associates may also be involved with other commercial transactions with
the entity. In case of partnership/proprietary concerns, the rating/outlook assigned by CARE Ratings is, inter-alia, based on the capital deployed by the
partners/proprietors and the current financial strength of the firm. The ratings/outlook may change in case of withdrawal of capital, or the unsecured loans brought
in by the partners/proprietors in addition to the financial performance and other relevant factors. CARE Ratings is not responsible for any errors and states that it has
no financial liability whatsoever to the users of the ratings of CARE Ratings. The ratings of CARE Ratings do not factor in any rating-related trigger clauses as per the
terms of the facilities/instruments, which may involve acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and
triggered, the ratings may see volatility and sharp downgrades.

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