Gitanjali, the Indian company that owns the Samuels retail chain in the United States, has seen a dramatic drop in its share price.
At press time, the owner of America’s sixth largest retail chain was trading at 109 rupees on the Mumbai stock exchange, far below last month’s 546 rupee trade price. The stock price has declined steadily for the past three weeks.
While the share price of many Indian jewelry companies has recently taken a hit due to a new Reserve Bank of India policy putting levies on imported gold, Gitanjali’s fall has been steeper than others, with its value declining around 80 percent, attracting the interest of only sellers.
On July 5, the Indian rating company Credit Analysis & Research (CARE) placed Gitanjali on credit watch, noting its “stressed liquidity position,” which could be exacerbated by the drop in its share price.
A CARE statement says Gitanjali does have certain strengths, including its experienced management, industry track record, integrated operations, and portfolio of brands. It also credits the improved “financial and operational performance” of Samuels Jewelers, which last holiday released impressive sales results.
But as negative factors, CARE cites Gitanjali’s increasing debt levels, the working capital intensity of the business, its long working capital cycle, and a challenging macroeconomic environment. It said Gitanjali has been placed on credit watch “due to a lack of adequate information.”
“We are awaiting further information—including detailed annual report from the company—for resolving the credit watch,” analyst Pulkit Agarwal told JCK.
On July 18, the National Stock Exchange of India suspended 26 entities—including Gitanjali managing director Mehul Choksi, from trading, pending an investigation into trading in Gitanjali, according to a report in The Economic Times.
Any corporate woes don’t seem to have affected the company’s retail plans; it just celebrated the opening of its 100th store in India, attended by a star from Bollywood.
But a recent report in the Israeli newsletter Diamond Intelligence Briefs agrees the company has liquidity issues, with substantial debts coming due.
A Gitanjali spokesman did not respond to a list of questions from JCK, saying the company is busy with store launches and the upcoming IIJS show. Samuels executives also declined comment.
Gitanjali, a De Beers sightholder, bought the Samuels retail chain (formerly Barry’s) in 2006.