21 April 2009
Gold and diamond wholesalers and retailers are under tremendous pressure to clear their inventories as their credit ratings for bank finance are being constantly monitored by lenders and rating agencies.
Some of the leading Indian diamond companies in the UAE are under particular scrutiny as many of their parent companies have been downgraded by a leading Indian credit rating agency. As a result, banks that lent money to these firms may reduce their exposure.
Credit Ratings Information Services Ltd (Crisil), India's largest credit rating agency, said the outstanding credit rating of Rosy Blue (India) Private, the number one Indian diamond exporter, has been downgraded along with nine other Indian diamond manufacturers and exporters because of the challenging business environment.
At the same time the credit ratings for bank credit of 14 diamond and jewellery manufacturers, including UAE-based Joy Alukkas Group, Su-Raj Diamond and Jewellery India, have been reaffirmed by the same rating agency. But any major capital expansion plans by Joy Alukkas Group may adversely affect the firm's credit outlook unless there is considerable change in its cash accruals, says the agency.
"The downgrading of credit ratings has long-term implications for the companies because over a period of time banks will reduce their exposure to such companies," said Joseph Thomas, Chief Representative of IndusInd Bank in Dubai.
"In addition they will stop giving credit to expand businesses. Banks that have lent to the downgraded companies will gradually reduce their exposure and try to recover outstanding credit.
"A couple of market leaders in the UAE gold and diamond jewellery market have managed to retain their positive credit ratings. Some firms have recorded foreign exchange losses and inventory revaluation losses due to volatile market conditions."
Crisil has downgraded its rating for Rosy Blue's bank facilities to BBB/Negative/P3 Plus from BBB+/Stable/P2. The downgrade reflects Crisil's belief the current challenging operating environment in the cut and polished diamond industry is expected to keep Rosy Blue's profitability under pressure.
The decline in accruals during the fiscal, coupled with the risk of losses on diamond inventory, is expected to lead to a deterioration of the firm's debt protection measures, according to Crisil.
Rosy Blue is India's market leader in the export of loose polished diamonds. It is part of the Rosy Blue Group, which has operations in 15 countries including the UAE and employs 15,000 people worldwide.The firm has manufacturing facilities in Indore. Officials did not respond to inquiries about rating change by Emirates Business.
A Jhaveri, Fine Jewellery Manufacturing, Kama Schachter Jewellery, M Suresh Company, Mohit Diamonds, Rosy Blue, S Narendra and Shreeji Jewellery have all had their ratings downgraded.
Gold and diamond wholesalers and retailers are under tremendous pressure to clear their inventories as their credit ratings for bank finance are being constantly monitored by lenders and rating agencies.
Some of the leading Indian diamond companies in the UAE are under particular scrutiny as many of their parent companies have been downgraded by a leading Indian credit rating agency. As a result, banks that lent money to these firms may reduce their exposure.
Credit Ratings Information Services Ltd (Crisil), India's largest credit rating agency, said the outstanding credit rating of Rosy Blue (India) Private, the number one Indian diamond exporter, has been downgraded along with nine other Indian diamond manufacturers and exporters because of the challenging business environment.
At the same time the credit ratings for bank credit of 14 diamond and jewellery manufacturers, including UAE-based Joy Alukkas Group, Su-Raj Diamond and Jewellery India, have been reaffirmed by the same rating agency. But any major capital expansion plans by Joy Alukkas Group may adversely affect the firm's credit outlook unless there is considerable change in its cash accruals, says the agency.
"The downgrading of credit ratings has long-term implications for the companies because over a period of time banks will reduce their exposure to such companies," said Joseph Thomas, Chief Representative of IndusInd Bank in Dubai.
"In addition they will stop giving credit to expand businesses. Banks that have lent to the downgraded companies will gradually reduce their exposure and try to recover outstanding credit.
"A couple of market leaders in the UAE gold and diamond jewellery market have managed to retain their positive credit ratings. Some firms have recorded foreign exchange losses and inventory revaluation losses due to volatile market conditions."
Crisil has downgraded its rating for Rosy Blue's bank facilities to BBB/Negative/P3 Plus from BBB+/Stable/P2. The downgrade reflects Crisil's belief the current challenging operating environment in the cut and polished diamond industry is expected to keep Rosy Blue's profitability under pressure.
The decline in accruals during the fiscal, coupled with the risk of losses on diamond inventory, is expected to lead to a deterioration of the firm's debt protection measures, according to Crisil.
Rosy Blue is India's market leader in the export of loose polished diamonds. It is part of the Rosy Blue Group, which has operations in 15 countries including the UAE and employs 15,000 people worldwide.The firm has manufacturing facilities in Indore. Officials did not respond to inquiries about rating change by Emirates Business.
A Jhaveri, Fine Jewellery Manufacturing, Kama Schachter Jewellery, M Suresh Company, Mohit Diamonds, Rosy Blue, S Narendra and Shreeji Jewellery have all had their ratings downgraded.
By VM Satish
© Emirates Business 24/7 2009
