04 June 2008
CRISIL IPO grade 4/5 assigned to
the IPO of Virgo Engineers Limited

CRISIL has assigned a CRISIL IPO Grade "4/5" (pronounced "four on five") to the proposed initial public offer of Virgo Engineers Limited (VEL). This grade indicates that the fundamentals of the issue are above average in relation to 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 offer price for the issue may be higher or lower than the level justified by its fundamentals. The grade is not a recommendation to buy / sell or hold the graded instrument, the graded instrument's future market price or its suitability for a particular investor.

The grading reflects VEL's favorable business prospects arising from the strong demand scenario expected in the exploration activity over the next 3-5 years. VEL is among the top 35 valve players in the world and the largest ball valve manufacturer in India. The grading takes into cognizance the high level of customer stickiness in the past (over 90 per cent of revenue comes from repeat business) and the cost competitive advantage on account of low overhead cost and efficiencies in raw material sourcing. Given its cost competitive strengths, it is well poised to benefit from the large investments planned by the oil majors in the Middle East, especially since it is on the Approved Manufacturers List (AML) of 3 out of the top 10 global oil players. However, competition is expected to intensify further over the next 3-5 years, which is likely to impact its margins in the long run.

The grading factors in the business acumen of the promoters who have successfully captured opportunities and translated them in terms of strong growth for the company. The grading also takes into account VEL's sound corporate governance structure.

Media Contact:

Ramya Krishnan Anil
Head, Market Development & Communications
CRISIL Limited
Phone: +91-22-6758-8051
Mobile: +91 98203 42671
Facsimile: +91-22-6758-8088
Email: RamyaKA@crisil.com

Analytical Contacts:

Arun Panicker
Senior Director,
CRISIL Limited

Tel: +91-22-6691 3300
Mobile: +91 98202 14483
Email: apanicker@crisil.com

Sudhir Nair
Head, CRISIL Research
Tel: +91-22-6691 3526
Mobile: +91 98208 60482
Email: snair@crisil.com

Client Servicing Contact:

Client Servicing
Tel: +91-22-6691 3561
Email: clientservicing@crisil.com

The grading is however moderated by the risk attached to high level of product concentration exposing it to any downturn in the investments in the oil and gas sector. We believe that the company's ability to find suitable replacement and to expand senior management bandwidth to meet future demand will be critical in sustaining business growth over the next 5 years.

About the company and the issue
Virgo Engineers Ltd (VEL) was incorporated as Virgo Engineers Private Limited in June 1987 and was changed to a public limited company in February 1995. The company primarily manufactures ball valves and has a small presence in the butterfly valves, gate valves and check valves segment. From a predominantly domestic player, VEL has gradually spread across US, Europe, Middle East and India. US accounts for nearly 40 per cent of the VEL's sales. India accounts for around 20 per cent, while Europe and Middle East accounted for 22 per cent and 15 per cent respectively.

VEL aims to raise around Rs 1.8 - Rs 1.9 billion by this proposed public issue of 2,430,000 equity shares.

About CRISIL IPO Grading
CRISIL IPO (Initial Public Offering) Grading is an opinion on the fundamentals of the graded issue that reflects CRISIL's independence and expertise. This opinion is expressed as a relative assessment in relation to other listed equity securities in India. The assessment is based on a grading exercise carried out by industry specialists from CRISIL Research. A CRISIL IPO Grade 5/5 indicates strong fundamentals and a CRISIL IPO Grade 1/5 indicates poor fundamentals. CRISIL IPO Grading reflects its assessment of the graded company's equity fundamentals as distinct from an assessment of debt fundamentals. A CRISIL IPO Grade should not be construed to mean a comment on the price of the graded security nor is it a recommendation to invest or not to invest in the graded security.

About CRISIL Limited
CRISIL is India's leading Ratings, Research, Risk and Policy Advisory Company.

About CRISIL Research
CRISIL Research is India's largest independent, integrated research house. We leverage our unique, integrated research platform and capabilities spanning the entire economy-industry-company spectrum to deliver superior perspectives and insights to over 600 domestic and global clients, through a range of subscription products and customised solutions.

A CRISIL IPO Grading is a one-time assessment and reflects CRISIL's current opinion on the fundamentals of the graded equity issue in relation to other listed equity securities in India. A CRISIL IPO Grading is neither an audit of the issuer by CRISIL nor is it a credit rating. Every CRISIL IPO Grading is based on the information provided by the issuer or obtained by CRISIL from sources it considers reliable. CRISIL does not guarantee the completeness or accuracy of the information on which the grading is based. A CRISIL IPO Grading is not a recommendation to buy / sell or hold the graded instrument; it does not comment on the issue price, future market price or suitability for a particular investor.

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June 04, 2008