CRISIL downgraded its ratings on the company's bank facilities, part of the PCJ Group, to 'CRISIL BB+/Negative/CRISIL A4+' from 'CRISIL BBB+/Negative/CRISIL A2', while CARE Ratings revised the ratings to the fixed deposit programme (jewel for less - jewellery purchase scheme) to CARE BB+ (FD).
“The downgrade reflects significant operating losses reported by the PCJ group on account of an unexpected one time discount of Rs 513 crore given to export customers following build-up of receivables outstanding as on March 31, 2019. As a result of these discounts, financial metrics were impacted, with interest coverage falling below 1 time in fiscal 2019,” CRISIL said in a rating rational.
CRISIL said the PCJ group's liquidity will remain constrained over the medium term owing to increased debtor risk on export receivables and significantly diminished ability to raise funds from capital markets due to depletion of its market capitalisation.
CRISIL has combined the business and financial risk profiles of PCJ and its four wholly-owned subsidiaries - PC Universal Pvt Ltd, Transforming Retail Pvt Ltd, Luxury Products Trendsetter Pvt Ltd, and PC Global Jewellers DMCC - collectively referred to as the PCJ group, as the entities have business and operational synergies. Moreover, PCJ had extended inter-corporate advances to the subsidiaries as they do not have bank lines of their own, the rating agency said.