PC Jeweller shares plunged 10 per cent to Rs 56. 20 in intra-day business on the BSE on Monday after rating agencies CRISIL and CARE Ratings revised their ratings to the company’s bank loan facilities and constant deposit programme.
CRISIL downgraded its ratings on the company’s bank facilities, a 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 constant deposit programme (jewel for less – jewellery purchase scheme) to CARE BB+ (FD).
“The downgrade reflects remarkable operating losses reported by the PCJ group as a result of an unforeseen one time reduction of Rs 513 crore provided to export customers following build-up of receivables outstanding as on March 31, 2019. Because 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 bring funds from capital markets because of depletion of its market capitalisation.
CRISIL has combined the trade 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 known as the PCJ group, as the entities have trade and operational synergies. In addition, PCJ had extended inter-corporate advances to the subsidiaries as they don’t have bank lines of their own, the rating agency said.
The inventory, which was once trading lower for the 12th straight day, has plunged 47 per cent from the level of Rs 106 on May 22. In comparison, the S&P BSE Sensex was once rose 2 per cent all through the same period.