CRISIL has assigned a CRISIL IPO Grade ‘3/5’ (pronounced ‘three on five’) to the proposed Initial Public Offer of Shriram EPC Ltd. (SEPCL). This grade indicates that the fundamentals of the issue are average in relation to other listed equity securities in India.SEPCL is a strong engineering, procurement, and construction (EPC) player in the metallurgy and captive power sectors in southern India. Both the sectors are on an upswing. The booming finished steel sector will see average annual capacity addition of 9-10 million metric tones, and CRISIL expects about 2,000-3,000 MW of captive power capacity addition annually, over the next five years. Prospects for the company’s existing business are therefore solid.

SEPCL has a capable and experienced top and middle management team, which has helped it attract large orders and prestigious collaborators.

However, there are still some uncertainties for the company to overcome. As on September 30, 2007, about 30 per cent of its order book consisted of a single EPC order for a cement plant. This is the first time that SEPCL is venturing into the cement sector in a big way. Additionally, the company’s principal collaborator for wind power, Leitwind, lacks experience in manufacturing MW-class Wind Electric Generators (WEGs). Attracting experienced and capable staff to power the company’s expansion plans will also prove to be a challenge, given the high demand and limited supply of such professionals.

The company’s governance processes, have improved after the induction of one director nominated by private equity player Bessemer.

Sourced From: CRISIL Limited

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