Instruments* Amount (Rs. crore) Rating action Long term: Term loans 1.01 (revised from 3.55)

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1 January 11, 2017 G R Thanga Maligai Instruments* Amount (Rs. crore) Rating action Long : Term loans 1.01 (revised from 3.55) [ICRA]A+ / reaffirmed *Instrument details are provided in Annexure-1 Rating action ICRA has reaffirmed the long rating of [ICRA]A+ (pronounced as ICRA A plus) 1 for the Rs crore 2 (revised from Rs crore) loans of G R Thanga Maligai (GRT / the proprietary concern). The outlook on the long rating is Stable. Rationale The reaffirmation of the ratings considers the stable performance of the GRT group during FY2016 and 8mFY2017 amidst headwinds from absence of sales due to floods in Chennai during December 2015, weak rural demand, falling consumption with steady rise in gold prices since Q4 FY2016, and volume impact on the back of industry-wide strike against the imposition of excise duty on gold jewellery in March While the tepid demand and rising competition affected the group s same store sales growth, its overall volumes were supported by the incremental sales from the stores commenced in last two years. The ratings remain supported by the promoter s vast experience in the jewellery retail industry, GRT group s strong brand image and established market presence in the Tamil Nadu market, widening geographical presence and favourable demand potential for organized players. The ratings also consider the group s strong financial profile characterised by improving margins aided by effective hedging practices and costs control measures, strong cashflows on the back of favourable operating cycle, improved liquidity and comfortable debt indicators with Total Outside Liabilities (adjusted for cash and promoter loans) to Tangible networth ratio at 1.6x in March 2016 and 1.8x in September The ratings, however, remains constrained by a relatively high geographical concentration of the business on the Chennai and Tamil Nadu markets despite the recent expansions, vulnerability of profit margins / earnings to the volatility in gold prices given the limited value addition in the business, and challenging pricing environment due to intense competition from other organised and unorganised jewellers. The recent currency demonetisation is likely to have an impact on the overall jewellery demand in the near- given the large cash-based nature of transactions. That said, the organised players are likely to benefit with the expected churn in unorganised segment. The group s recent / planned investments in solar projects is likely to keep the debt levels higher in the near to medium, at the same time it provides tax benefits and assures recurring income over the long. Going forward, recovery in demand and stability in gold prices (which has seen sharp correction in recent weeks) will be critical monitorables apart from the early turnaround of the stores recently commenced / planned to be commenced. Key rating drivers Credit Strengths Established presence and leading market position in the jewellery retail market of Chennai Promoter s vast experience in the jewellery retail industry Improving geographical diversification with expansion across Tamil Nadu and other southern states to support volume and revenue growth over the medium Healthy demand outlook for the organized jewellery retail industry over the medium to long, underpinned by the strong cultural affinity for gold and increasing formalization of the sector 1 For complete rating scale and definitions, please refer to ICRA's website or other ICRA Rating Publications lakhs = 1 crore = 10 millions

2 Credit Weakness Relatively high geographical concentration Margin expansion constrained by relatively low value addition and significant competition with limited entry barriers Earnings exposed to volatility in gold prices; higher share of purchases of bullion made under gold metal loan mitigates price risk and provide comfort to the liquidity Description of key rating drivers highlighted above: GRT group has an established market position with a dominant share in the jewellery retail market of Chennai. While the geographical concentration remains high with 67% of the revenues in FY2016 coming from the Chennai market, the group s presence for more than five decades in the region has aided in developing strong brand loyalty as reflected by the support for volumes, witnessed across showrooms despite increasing competitive scenario and weak operating environment. Going forward, the geographical diversification is expected to improve given the proposed store expansion plans in near across Tamil Nadu and the incremental volumes from the new stores is likely to aid in overall revenue growth. However, the increased regulatory risk in the industry in the recent years exposes the operations to risk of disruption in gold bullion supplies / refinancing risks. The recent currency de-monetization exercise is likely to impact the industry demand, but with increasing formalization of the jewellery retail sector, the organized players (including GRT group) are expected to benefit in the medium to long at the expense of unorganized players. Margin expansion continues to remain constrained by relatively low value addition and significant competition with limited entry barriers in the sector. While the earnings remain exposed to volatility in gold prices with a portion of inventory remaining un-hedged, the higher share of purchases made through gold metal loans and increase in advance from customers mitigates the price risk to an extent and provide comfort to the liquidity profile. Analytical approach: For arriving at the ratings, ICRA has taken a consolidated view of five entities in the group G R Thanga Maligai, G R Thanga Maligai (Firm), G R Thanga Maligai & Sons, GRT Silverwares and GRT Jewellers (India) Private Limited since all of them operate in the same line of business, have operational linkages and share a common management. Links to applicable Criteria Corporate Credit Rating - A Note on Methodology Rating Methodology for Gold Jewellery Retail Industry About the Company: G R Thanga Maligai (GRTM) is a pioneer in jewellery retail in Tamil Nadu having been existent in the business since It is the oldest entity in the GRT group and is a proprietary concern managed by Mr. G. Rajendran, the chairman of the GRT group. The entity has a showroom in the heart of Chennai which it shares with another group entity - G R Thanga Maligai (Firm) [GRTMF]. The product profile catered to by the entities are different, where GRTM markets traditional gold ornaments and substantially takes up manufacturing activity, whereas GRTMF is primarily involved in sales of customized jewellery where it specializes in sales of Mangal Sutra and exquisite jewellery. Performance of the entity has moderated with the jewellery operations being shifted to GRTMF, whereby the overall group performance remains strong. About the Group: GRT group, a closely held group with presence in jewellery retailing and hospitality sectors, has an established presence in the jewellery retail industry of South India, where it has been involved in retailing of gold and studded jewellery over the past five decades. From being an entity with presence only in Chennai, the group has diversified geographically with expansions across southern states in the recent past. The group currently derives around 90% of its revenues from the gold jewellery sales with the rest from sale of silver, coins and studded jewellery.

3 Status of non-cooperation with previous CRA: Not Applicable Any other information: Not Applicable Rating History for last three years: Table: Rating History Current Rating Rated Month - amount year & S. Name of Type (Rs. rating No. Instrument Crores) 1 Term loans 2 3 Fund based - Cash Credit Fund based / Non-fund based (sublimits) Long Long Short 1.01 Jan 2017 Dec 2015 [ICRA]A+ Chronology of Rating History for the past 3 years Month - Month - year & Month - year & year & Rating in Rating in FY2015 Rating in FY2016 FY2014 Dec Jun 2014 Nov 2013 [ICRA]A [ICRA]A (Negative) (Negative) [ICRA]A2+ [ICRA]A2+ Complexity level of the rated instrument: ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The classification of instruments according to their complexity levels is available on the website

4 Annexure-1 Details of Instruments Name of the instrument Date of issuance Coupon rate Maturity Date Size of the issue (Rs. Cr) Current Rating and Outlook Term loans [ICRA]A+ Source: GRTM Name and Contact Details of the Rating Analyst(s): Analyst Contacts Subrata Ray subrata@icraindia.com Vinodh Selvaraju vinodh.selvaraju@icraindia.com K Srikumar k.srikumar@icraindia.com Name and Contact Details of Relationship Contacts: L Shivakumar shivakumar@icraindia.com About ICRA Limited: ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment Information and Credit Rating Agency. Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency Moody s Investors Service is ICRA s largest shareholder. For more information, visit Copyright, 2017, ICRA Limited. All Rights Reserved Contents may be used freely with due acknowledgement to ICRA ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subject to a process of surveillance, which may lead to revision in ratings. An ICRA rating is a symbolic indicator of ICRA s current opinion on the relative capability of the issuer concerned to timely service debts and obligations, with reference to the instrument rated. Please visit our website or contact any ICRA office for the latest information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable, including the rated issuer. ICRA however has not conducted any audit of the rated issuer or of the information provided by it. While reasonable care has been taken to ensure that the information herein is true, such information is provided as is without any warranty of any kind, and ICRA in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. Also, ICRA or any of its group companies may have provided services other than rating to the issuer rated. All information contained herein must be construed solely as statements of opinion, and ICRA shall not be liable for any losses incurred by users from any use of this publication or its contents.

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