CRISIL has assigned a CRISIL IPO Grade “4/5″ (pronounced “four on five”) to the proposed initial public offer (IPO) of Ashoka Buildcon Ltd (Ashoka). This grade indicates that the fundamentals of the IPO are above average relative to the other listed equity securities in India. However, this grade is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. The grade is not arecommendation to buy/sell or hold the graded instrument, or a comment on the graded instrument’s future market price or its suitability for a particular investor.

The grading reflects the company’s dominant position in the build-operate-transfer (BOT) road space and its established track record, with most of its projects having witnessed timely completion. The grading has also taken into consideration the strong management background with domain expertise, robust industry prospects due to significant investment expected in roads and power transmission and distribution (T&D) segments, proven execution capabilities in the engineering procurement construction (EPC) segment, integrated business model and adequate corporate governance practices. The grading also reflects the company’s strong order book of Rs 17,850 Mn as well as healthy revenue growth potential from the BOT segment.
The grading takes into account the fact that Ashoka’s BOT (toll) projects are restricted to Maharashtra and Madhya Pradesh. Moreover, despite having the early mover advantage, company has only few large projects in its portfolio.

converted into a public limited company on April 22, 2002, and was renamed Ashoka Buildcon Ltd (Ashoka). Ashoka is in the business of undertaking EPC contracts in roads, bridges, commercial buildings, industrial buildings and power T&D contracts. Apart from building roads and bridges, it also operates them on a BOT basis. Promoters, Mr. Ashok Katariya and Mr. Satish Parakh, and their groups, currently own 84.4 per cent of Ashoka.

Ashoka has 16 operational road projects (1,088 lane km), four projects under construction (1,423 lane km) and third-party orders worth Rs 12,673 Mn. The company has recently ventured into EPC – power T&D contracts, where it has outstanding orders of Rs 9,682 Mn from Maharashtra State Electricity Distribution Company.

Ashoka’s board comprises eight directors, four of whom are independent directors and one is nominee director. The board is chaired by its promoter and executive director, Mr. Ashok Katariya, who has more than 33 years of experience. The managing director, Mr. Satish Parakh has over 28 years of experience in the construction industry. Other board members include nominee director of Infrastructure Development Finance Company (IDFC) Private Equity (PE). The key management team has an average work experience of more than 20 years and has been with the company for more than 10 years on an average.

Ashoka is planning to raise Rs 2,250 Mn from the IPO. Of this, Rs 700 Mn would be utilised for purchasing capital equipments and for working capital requirements and Rs 1,150 Mn would be used to prepay the loans of the company and its subsidiaries. The balance would be utilised for general corporate uses.

Ashoka registered top line and net profit CAGR of 39.4 per cent and 35.0 per cent respectively from 2004-05 to 2008-09. In 2008-09, the company reported net profit of Rs 312 Mn on a turnover of Rs 5,205 Mn, translating into a net margin of 6.0 per cent. It posted an EPS of Rs 5.3 during the same period, while its book value per share stood at Rs 59.1. Ashoka’s return on capital employed (ROCE) and return on equity (ROE) for the year stood at 11.7 per cent and 9.5 per cent, respectively.

CRISIL Equities has assigned a CRISIL IER Fundamental Grade “3/5″ (pronounced “three on five”) to ABG Shipyard Ltd. (ABG). This grade indicates that the fundamentals of the company are ‘Good’ relative to other listed equity securities in India. With respect to valuations, CRISIL Equities has assigned a valuation grade of “4/5” indicating that the stock has potential ‘Upside’ (Fundamental value of Rs 242, from the current market price of Rs 202). The grades are not a recommendation to buy/sell or hold the graded instrument, or a comment on the graded instrument’s future market price or its suitability for a particular investor.

The assigned fundamental grading reflects ABG’s status as the largest private sector shipyard in India and a strong revenue visibility for next 3-4 years despite the current downturn in the shipping industry. The company has established relationship with major clients and gets healthy repetitive orders. The company has also entered into the new area of rig building and has bagged two rig orders from Essar Oilfiled Services P Ltd. The grading is, however, tempered by the cyclical nature of the shipping industry. The grading also takes into account the concentration of order book and uncertainty over the acquisition of Great Offshore.

CRISIL Equities expects ABG to display robust revenue growth of 26.4% CAGR over the next 3 years to touch Rs 31.4 billion by FY12 on the back of strong order and commissioning of the expanded capacity at Dahej. With the capital subsidy scheme applicable for significant portion of the current order book, operating margins are expected to remain at the current level of 28-29%. The current order book is expected to be executed by FY12. Driven by higher profitability, CRISIL Equities expects Earnings per share (EPS) to jump to Rs 42.9 in FY12 from Rs 32.5 in FY09. However, the ROE is expected to fall from 21% in FY09 to 16.8% in FY12.

On the valuation grading, CRISIL Equities has used Sum of the Parts (SOTP) approach to arrive at the fundamental value for ABG. Based on the SOTP method, the fundamental value for ABG is estimated at Rs 242 which translates into a valuation grade of “4/5” indicating that the stock has potential ‘Upside’ from the market price of Rs 202 (as on November 23, 2009).

ABG Shipyard is the largest private sector shipyard in India, with manufacturing and service facilities in Magdala, Surat and Dahej. The company can manufacture vessels of length up to 250 metres and capacity upto 120,000 dead weight tonnes (DWT). ABG has delivered 111 vessels since 1989, including bulk carriers, cement carriers, offshore support vehicles, interceptor boats, multi-support vessels and barges. Over the past two decades, the company has grown significantly, establishing a niche position in the Indian shipbuilding industry. It has customers in Europe, the Middle East and India.

CRISIL Equities has assigned a CRISIL IER Fundamental Grade “3/5″ (pronounced “three on five”) to UTV Software Communications Ltd. (UTV). This grade indicates that the fundamentals of the company are ‘Good’ relative to other listed equity securities in India. With respect to valuations, CRISIL Equities has assigned a valuation grade of “5/5” indicating that the stock has ‘Strong Potential Upside’ (Fundamental value of Rs 548, from the current market price of Rs 420. The grades are not a recommendation to buy/sell or hold the graded instrument, or a comment on the graded instrument’s future market price or its suitability for a particular investor.

The assigned fundamental grading reflects UTV’s position as the market leader in the Hindi films business, its diversified revenue mix, strong management capability and expected improvement in profitability as its investments in the gaming and television broadcasting businesses begin to pay off. UTV’s comprehensive business model has enabled it to rope in Walt Disney as a strategic partner with a 60% stake (Walt Disney’s voting rights are capped at 32.1% for a period of 4 years ending November 2012). CRISIL Equities believes this association with Walt Disney is a positive factor from a strategic perspective and will also provide it access to overseas markets. The grading is, however, tempered by the inherent risks associated with the films business, such as project execution risk and susceptibility to changing audience tastes and preferences, and uncertainty of success in the games development business.

CRISIL Equities expects UTV to display robust revenue growth of 37% CAGR over the next 3 years to touch Rs 15.7 billion by FY12 on the back of strong growth in the films business, the broadcasting segment gaining traction, and the planned release of 3 large Intellectual Properties in the console games development business. With investments beginning to generate returns and content being effectively monetised across various media platforms, CRISIL Equities expect UTV’s profitability to improve. The EBIT margin of the company is expected to improve markedly from negative 15% in FY09 to around 17% in FY12. Driven by
higher profitability, CRISIL Equities expects Earnings per share (EPS) to jump to Rs 53 in FY12 after a 47% slump to Rs 7.2 in FY10.

UTV’s return on capital has been adversely impacted by investments made in the television broadcasting and gaming businesses (Rs 7 billion as of March 2009). During FY09, its return on equity (RoE) was 6.8%.

CRISIL Equities believe it will take another 12-18 months for investments made in these businesses to pay off. Consequently, UTV’s RoE is projected to improve significantly only after FY11 and touch 16% by FY12.

On the valuation grading, CRISIL Equities has used Sum of the Parts (SOTP) approach to arrive at the fundamental value for UTV. Based on the SOTP method, the fundamental value for UTV is estimated at Rs 548 which translates into a valuation grade of “5/5” indicating that the stock has ‘Strong Potential Upside’ from the market price of Rs 420 (as on October 30, 2009)

UTV Software Communications Ltd. began operations in 1990 with production of television content and ad films. Subsequently, it entered the movie production and distribution business. Over the last 3 years, The company has become increasingly aggressive in its efforts to pursue growth, channelising huge investments in its films businesses and entering the television broadcasting, gaming, and new media businesses.

Between FY07 and FY09, its capital employed jumped by close to 6 times to Rs 19 billion. During the same period, revenues grew at a CAGR of 86% to Rs 6 billion. The company has forayed into the films business contributed 45% to the topline in FY09, while the television content and gaming segments accounted for 22% and 18% of revenues respectively. With content being a common feature across each business, UTV is focused on creating content and owning intellectual property rights for the same for exploitation across all major media different platforms.

L&T Finance Limited, promoted by engineering and construction giant Larsen & Toubro Limited and L&T Capital Holdings Limited and providing a range of financial services, will open on August 18, 2009, its first-ever public offer of 50,00,000 Secured Redeemable Non-Convertible Debentures (“NCDs”) of the face-value of Rs. 1,000 each. The NCD Issue aggregates to Rs. 500 crore, with an option to retain over-subscription up to Rs. 500 crore for issuance of additional NCDs, aggregating upto a total of Rs. 1,000 crore. The NCD Issue with various investment options and yield on Redemption of upto 10.50% (per annum) opens on August 18, 2009, and closes on September 4, 2009.

The NCDs offered through the Prospectus are proposed to be listed on National Stock Exchange of India Limited (“NSE”). The face value of Rs. 1,000 per NCD and tradable lot size of 1 NCD is expected to enhance liquidity and trading in the secondary market.

The NCDs have been rated ‘CARE AA+’ by CARE and ‘LAA+’ by ICRA. Instruments with a rating of ‘CARE AA+’ by CARE are considered to offer high safety for timely servicing of debt obligations. Such instruments carry very low credit risk. The rating of ‘LAA+’ by ICRA indicates high-credit-quality and the rated instrument carries low credit risk.

There are four investment options:

Option 1 (Quarterly interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 60 months. from the deemed date of allotment. The coupon rate is 9.51% p.a. and the annualized yield is 9.85%. The interest payment is quarterly and the face value plus any interest that may have accrued is payable on redemption.

Option 1I (Semi-annual interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 60 months from the deemed date of allotment. The coupon rate is 9.62% p.a. and the annualized yield is 9.85%. The interest payment is semi-annual and the face value plus any interest that may have accrued is payable on redemption.

Option I1I (Cumulative interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 88 months from the deemed date of allotment. The coupon rate is 9.95% compounded annually and the annualized yield is 9.95%. The interest payment is cumulative and Rs. 2,005 per NCD is payable on redemption.

Option IV (Semi-annual interest payment): The face value is Rs. 1,000 and the minimum application is Rs. 10,000 (Retail) and Rs. 1,01,000 (NIIs and QIBs) and in multiples of Rs. 1,000 therein. The redemption date or maturity period is 120 months from the deemed date of allotment. The coupon rate is 10.24% p.a. and the annualized yield is 10.50%. The interest payment is semi-annual and the face value plus any interest that may have accrued is payable on redemption.

Senior citizens, who are 65 or more years of age at any time during the financial year (FY) 2009-10, enjoy the special privilege to submit a self declaration in the prescribed Form 15H for non-deduction of tax at source in accordance with the provisions of section 197A (1C) of the I.T. Act even if the aggregate income credited or paid or likely to be credited or paid does not exceed the maximum amount not chargeable to tax; i.e., Rs. 225,000 for FY 2008-09 (proposed Rs. 240,000 from FY 2009-10).