CRISIL assigns ''1 on 5'' to MBL Infrastructures Ltd IPO
13 Apr 2007
Proposed public issue of 6,000,000 equity shares at a target price of Rs100 per share totalling Rs600 million.
CRISIL has assigned a CRISIL IPO grade '1/5' (pronounced 'one on five') to the proposed initial public offer of MBL Infrastructures Ltd. This grade indicates that the fundamentals of the issue are poor relative to other listed equity securities in India.
The assigned grade reflects MBL's weak competitive position in the road construction industry, especially the Build Operate and Transfer (BOT) segment. It also reflects the fact that the company's management has been a late mover in capturing business opportunities in its area of operation and that the returns from the company's planned large investment in the BOT segment would be subject to a lead time of four - five years.
The grading takes into account the company's good track record in the road maintenance business segment, which would benefit from the current boom in the road construction industry.
However, CRISIL notes that MBL's fund requirement for the construction contracting and road maintenance parts of its business is much lower than the amount that MBL is planning to raise in the current issue.
Consequently, CRISIL believes that these parts of MBL's business would not be able to support its enhanced equity base.
