04 September 2007
CRISIL IPO grade 4/5 assigned to the IPO of
Precision Pipes and Profiles Company Ltd

Proposed public issue of 5,000,000 equity shares at a targeted price of Rs 150 per share aggregating Rs 750 million

CRISIL has assigned a CRISIL IPO Grade "4/5" (pronounced 'four on five') to the proposed initial public offer of Precision Pipes and Profiles Company Ltd (PPAP). This grade indicates that the fundamentals of the issue are above average, relative to other listed equity securities in India.

The grading reflects the company management's success in transforming a small plastic processing business into a Tier-I supplier of PVC profiles to leading passenger car OEMs. It takes into account the company's track record of strong client and collaborator relationships over an extended period, healthy revenue growth potential, strong product and tool development capabilities, the expected enhancement in management's corporate governance performance with the appointment of high profile independent directors on the board, and the possibility of revenue and profit upside from the proposed export project. The grading also takes into account the fact that future margins are likely to be lower than in the past, and the uncertainties arising out of the absence of a succession plan in the group's finance function and the impact of any future separation of promoters on the company.

About the company
PPAP was incorporated in 1978 as a partnership firm, and was converted into a public limited company in October 1995. It supplies PVC profiles to leading passenger car OEMs - including Maruti Udyog, Honda SIEL, Toyota Kirloskar Motors and General Motors - and also to key players in white goods, electrical and construction industries. Over 90 per cent of its revenues are derived from the automobiles segment. Since 1989, PPAP has had a technical collaboration with Tokai Kogyo Co Ltd (TKCL), Japan, which supplies PVC profiles to OEMs such as Honda, Toyota and Suzuki, in Japan.

At present, PPAP has five manufacturing facilities in the NCR region of Delhi, with an aggregate capacity of 4.75 million kg of PVC. It has proposed a capital expenditure of Rs. 946 million over the next 2 years to double its capacity to 9.9 million kg by 2008-09. This expansion will be undertaken to set up a new plant at Surajpur to manufacture automobile profiles, expand the capacity of its existing facility at Noida, upgrade in-house tooling capabilities, and lastly, set up a new plant at Badarpur dedicated for exports to Power and Data Corporation Pty Ltd, Australia. The company plans to fund this expansion through term loans of Rs 250 million from ICICI Bank and internal accruals of Rs 60 million. The balance amount of Rs 750 million will be met through the proposed IPO.

For the year ended March 2007, PPAP recorded a net profit of Rs 138.8 million on an operating income of Rs 1,097.8 million, compared with a net profit of Rs 79.9 million on an operating income of Rs 805.9 million for the year ended March 2006.

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.

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Ajay Dwivedi
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Email: adwivedi@crisil.com

Sudhir Nair
Head, CRISIL Research
Phone: +91-22-6691 3526
Email : snair@crisil.com
Client Servicing
Tel: +91-22-6691 3561
Email: clientservicing@crisil.com

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September 04, 2007