Press Release

Vijay Sales April 3, 2020

Ratings Amount Facilities Rating1 Rating Action (Rs. crore) Long term/Short term Bank CARE A+; Stable/CARE A1+ Facilities-Fund Based/Non 100.00 (Single A Plus; Outlook: Reaffirmed Fund Based Stable/A One Plus) 100.00 Total Facilities (Rs. One hundred crore only) Details of instruments/facilities in Annexure-1 Detailed Rationale & Key Rating Drivers The rating assigned to long term/short-term facilities of Vijay Sales (VS) derives strength from the experienced promoters, brand’s established track record in consumer electronic retail industry along with key presence in , , , and , ownership model of operation for majority of stores, increase in revenue & profitability during FY19 (April 1 to March 31), comfortable financial risk profile, de-risked inventory holding model and efficient working capital management. The above ratings are constrained by stiff competition from online and offline channels in consumer electronic retail industry, susceptibility of operating margins on performance of new stores and partnership constitution of the firm. Rating Sensitivities Positive Factors  Change in constitution to a limited company while maintaining the capital structure  Diversification of geographical presence Negative Factors  Increase in operating cycle to over 50 days due to stretched inventory cycle.  Increase in overall gearing above 1.00x on sustained basis on account of higher working capital requirement or capex funded through term loans  Significant Increase in support to OVOT Pvt. Ltd.

Detailed description of the key rating drivers Key Rating Strengths Experienced Promoters Vijay Sales (VS) is established by Mr. Nanu Gupta, he is having more than four decades of experience in electronic goods industry. Vijay Sales is managed by Mr. Nanu Gupta and his two sons Mr. Ashish Gupta and Nilesh Gupta. Mr. Nanu Gupta is in charge of finance department and sales of LCD/LED TVs; Mr. Nilesh Gupta is in charge of sales of digital devices, Human Resource and Marketing and Mr. Ashish Gupta is in charge of sales of large appliances. Vijay Sales has experienced team of professional for managing sales and inventory. Established brand with key presence in Maharashtra, Gujarat, Delhi, Haryana and Uttar Pradesh Vijay Sales is the one of the largest electronic appliance retailer in the country operating of multi-brand electronic stores under the brand name ‘Vijay Sales’. VS is an established brand having its key presence in Maharashtra, Gujarat, Delhi, Haryana and Uttar Pradesh. Commencing its operations in October 1971, VS has 97 stores as on March 31, 2019. VS derive its major share of revenue i.e about 59.20% in FY19 from Maharashtra followed by Delhi (16.11%) & Gujarat (15.29%) Increase in revenue and profitability aided by addition of new store Vijay Sales revenue has increased during FY19, from Rs.3237.47 crore to Rs.3459.34 crore, an improvement of 6.85% the increase in revenue is due to a combination of both increase in volumes sold & increasing number of stores. Similarly, PBILDT & PAT levels have also increased on a y-o-y basis, with firm having reduced its cost of materials during FY19, with favourable pricing. Comfortable financial risk profile VS has comfortable financial risk profile as characterised by comfortable overall gearing of 0.19x as on March 31, 2019 vis-à- vis 0.23x as on March 31, 2018. VS does not have any term debt. Vijay Sales has comfortable interest coverage ratio at 32.03x in FY19 (39.44x during FY18), Further VS’ other debt coverage ratio like TD/GCA has improved to 1.42x during FY19 vis-à-vis 1.67x during FY18 Key Rating Weaknesses

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Threat from online and offline channels VS derives majority of its revenue from Maharashtra, however, it has been expanding in other states and is exposed to unforeseen region specific risk and competition from local players, online vendors like Flipkart, Amazon etc. who have been resorting to heavy discounting. Partnership constitution of firm Vijay Sales being a partnership entity, the risks associated with withdrawal of partners’ capital exists. The entity is exposed to inherent risk of partners’ capital being withdrawn at time of personal contingency as also it has limited ability to raise capital and may result in dissolution of entity. Due to the partnership constitution, it has restricted access to external borrowing where net worth as well as credit worthiness of partners is the key factors affecting credit decision of lenders. Industry Outlook The Indian retail industry has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players. Total consumption expenditure is expected to reach nearly USD 3,600bn by 2020 from USD 1,824bn in 2017. It accounts for over 10% of the country’s Gross Domestic Product (GDP) and around 8% of the employment. is the world’s fifth-largest global destination in the retail space. The Government of India has also supported and taken various initiatives to improve the retail industry in India. In 2018, India’s retail sector investments doubled to reach Rs. 1,300 crore. Going ahead, e-commerce is expected to drive the growth rate which makes brands/retailers access customers in tier 2 and tier 3 cities easier. It is projected that by 2021 traditional retail will hold a major share of 75 per cent, organised retail share will reach 18 per cent and e-commerce retail share will reach 7% of the total retail market. Barring the current downturn in the economy and reduction in consumer spending in the medium term, the long-term outlook for the industry seems positive which is supported by rising incomes, favourable demographics, entry of foreign players, and increasing urbanisation. Liquidity: Strong - Liquidity is marked by strong accruals against nil repayment obligations and cash and cash equivalents to the tune of Rs.88.59 crore & Fixed Deposits amounting to Rs.175.04 crore as on March 31, 2019. Firm has gearing of 0.19 times as of March 31, 2019. It has minimal to low utilization with average utilization at 3.63% for 12 months ended January 2020. Current ratio for the company is at 1.41x as on March 31, 2019. The firm’s capex going ahead are to be funded by internal accruals and partner’s infusion. Analytical approach: Standalone Applicable Criteria Criteria on assigning ‘outlook’ and ‘credit watch’ to Credit Ratings CARE’s Policy on Default Recognition Financial ratios – Non-Financial Sector Rating Criteria for Short Term Instruments Rating Methodology: Consolidation and Factoring Linkages in Ratings Retail Methodology-Organized Retail Companies About Vijay Sales Established in 1967 by Mr. Nanu Gupta, M/s Vijay Sales (VS) is chain of multi brand electronic stores. VS is currently managed by Mr. Nanu Gupta and his two sons Mr. Nilesh Gupta and Mr. Ashish Gupta. VS was earlier established in 1967 as a Small Television showroom by Mr. Nanu Gupta, later in 2001 Vijay Sales was incorporated as partnership firm. As on March 31, 2019 Vijay Sales had 97 operational stores. VS operates majorly in Maharashtra, Gujarat, Delhi, Haryana and Uttar Pradesh. VS also has its in-house brand “Vise”; Vise offers wide range of Televisions, Washing Machines and Air Conditioners which are exclusively available at Vijay Sales. Brief Financials (Rs. crore) FY18 (A) FY19 (A) Total operating income 3237.47 3459.34 PBILDT 114.36 132.62 PAT 37.76 40.35 Overall gearing (times) 0.23 0.19 Interest coverage (times) 39.44 32.03 A: Audited

Status of non-cooperation with previous CRA: Not Applicable Any other information: Not Applicable Rating History for last three years: Please refer Annexure-2 Annexure-1: Details of Instruments/Facilities

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Name of the Date of Coupon Maturity Size of the Issue Rating assigned Instrument Issuance Rate Date (Rs. crore) along with Rating Outlook Fund-based/Non-fund- - - - 100.00 CARE A+; Stable based-LT/ST / CARE A1+

Annexure-2: Rating History of last three years Sr. Name of the Current Ratings Rating history No. Instrument/Bank Type Amount Rating Date(s) & Date(s) & Date(s) & Date(s) & Facilities Outstanding Rating(s) Rating(s) Rating(s) Rating(s) (Rs. crore) assigned in assigned in assigned in assigned in 2019-2020 2018-2019 2017-2018 2016-2017 1. Fund-based/Non- LT/ST 100.00 CARE A+; 1)CARE A+; 1)CARE A+; - - fund-based-LT/ST Stable / Stable / Stable / CARE A1+ CARE A1+ CARE A1+ (24-Sep- (29-Mar- 19) 19)

Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications. Contact us

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