CRISIL has assigned its bank loan ratings of ‘BBB+/Stable/P2’ to the various bank facilities of Lanco Infratech Ltd (LITL). The ratings are underpinned by LITL’s established market position in the construction segment in India, and its comfortable financial risk profile. These strengths are, however, partially offset by LITL’s revenue dependence on its special purpose vehicles (SPVs), its significant exposure to investments in the SPVs, which are in project stage, and pressures on LITL’s operating margins owing to risks of cost escalations.

Outlook:Stable
CRISIL expects LITL to maintain its healthy business profile backed by engineering procurement and construction (EPC) work undertaken for its SPVs. The outlook may be revised to ‘Positive’ on timely commencement and stabilisation of commercial operations in all the major SPVs, coupled with an improvement in LITL’s credit profile through customer diversity. Conversely, the outlook may be revised to ‘Negative’ if the cumulative value of new projects of LITL and all its SPVs exceed Rs.110 billion in the medium term, without significant fresh equity infusion.

About LITL
Incorporated in 1993 as Lanco Constructions Ltd in Secunderabad, Andhra Pradesh, the company got its present name in 2000. Over the years, LITL has grown from a construction entity to an infrastructure conglomerate, with more than 15 SPVs under its fold, operating in the core sectors of power generation, power trading, realty, engineering and construction, and other infrastructure projects. The company has an order book position of close to Rs. 200 billion, largely from EPC work to be executed for its SPVs. For 2007-08 (refers to financial year, April 1 to March 31), LITL, on a standalone basis, reported a profit after tax of Rs. 2 billion on net sales of Rs.15.75 billion.