(The following statement was released by the rating agency)
June 05 - Fitch Ratings has affirmed India-based BC Sen & Co. Limited's (BC Sen) National Long-Term rating at 'Fitch BBB(ind)'. The Outlook is Stable. A list of additional rating actions is provided at the end of this commentary.
The ratings reflect the working capital-intensive nature of the jewellery trading business. This is reflected in BC Sen's near-full working capital utilisation during the 12 months ended 30 April 2012 due to a high inventory holding period of 250-300 days and intense competition in the retail gold jewellery market. However, this risk is partly mitigated by the company's efficient inventory management which ensures that it replenishes the amount of gold sold in the following day.
The ratings benefit from BC Sens's continued comfortable credit metrics with net debt/EBITDA of 0.96x for the financial year ended March 2012 (FY11: 0.87x) and interest cover of 6.49x (7.17x) based on provisional results. EBITDA margins have been consistent at around 7%-8% over the past four years, despite wide fluctuations in gold prices, reflecting the company's ability to pass on price changes to end-consumers.
Positive rating guidelines include consistent growth in sales above INR2,000m, maintaining net leverage below 1x and interest coverage above 7x on a sustained basis. Negative rating guidelines include a decline in EBITDA margins resulting in net debt/EBITDA over 2x and interest cover below 5x on a sustained basis.
BC Sen is engaged in the business of trading gold jewellery since 1888. Currently, it has five showrooms in India, of which four are in Kolkata and one is in Gurgaon. For FY12 BC Sen reported revenue of INR1,795m, up from FY11's INR1,730m.
Fitch has also affirmed BC Sen's bank loan ratings as follows:
- INR154.5m fund-based limit affirmed at 'Fitch BBB(ind)'/'Fitch A2(ind)'
- INR60m non-fund-based limit (increased from INR35m) affirmed at 'Fitch A2(ind)'