CRISIL has assigned a CRISIL IPO Grade "3/5" (pronounced "three on five") to the proposed initial public offer of Nu Tek India Ltd (NTIL). This grade indicates that the fundamentals of the issue are average relative 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 grade is 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 grading reflects NTIL's strength in offering a complete range of services related to the roll out of wireless telecom infrastructure. NTIL has proven execution capability in the deployment of wireless telecom infrastructure in difficult terrains such as Jammu & Kashmir (J&K). The company also has the advantage of having worked on projects with relatively new technologies such as WiMax and the successful implementation of the underground network for Delhi Metro Rail. NTIL's clients include all major telecom operators, telecom equipment vendors and telecom infrastructure leasing companies. On the back of NTIL's healthy order book position and strong network roll out plans of telecom operators, we expect the company's revenue growth momentum to continue over the next couple of years. However, margins may contract slightly due to change in the revenue mix in favour of full turnkey projects.

NTIL's business direction and vision is governed by its founder promoter - Mr. Inder Sharma. The second line management of the company is relatively strong and headed by people with vast domain expertise.

Our grading is tempered by the company's unfavourable working capital position that has deteriorated over the past two years. The grading also takes into consideration the limited management bandwidth available to the company in view of the expected strong growth in existing business. The grading also reflects the inadequate corporate governance structure that could lead to a potential area of conflict.

The issue consists of fresh issue of 3.5 million shares and the offer for sale of 1 million shares aims to raise Rs 1,125 million - Rs 1,350 million.

About the company and the issue
Formed in 1993, Nu Tek India Ltd (NTIL) is a telecom infrastructure service provider, offering services related to the infrastructure roll out, primarily for the wireless telecom network. The company's range of services includes conceptualisation, design, construction, installation, commissioning, integration, testing, operation and maintenance of wireless telecom infrastructure (both active as well as passive). In addition, it also provides services in relation to laying of optic fibre network. The Delhi-based company derives a major portion of its revenues from the northern region of India.

NTIL was promoted by Mr. Inder Sharma and his wife Mrs. Sumati Sharma in 1993, as a company providing maintenance services for Alcatel's E-10B switches to ITI Ltd. In 1996, the company started offering technical manpower outsourcing services for telecom projects and in 1999, the company expanded its operations by offering services related to installation and integration of active telecom infrastructure. In 2002, the company ventured into telecom turnkey projects for the construction and installation of passive telecom infrastructure. Finally, in 2005, NTIL started offering services in relation to the operation and maintenance of telecom infrastructure. NTIL has recently set up a subsidiary in Turkey to carry on the existing business of telecom infrastructure services in Turkey.

In 2006-07, the company reported a net profit of Rs 127 million on a turnover of Rs 637 million. In 2006-07, the company's return on capital employed (RoCE) and return on equity (RoE) was 48.7 per cent and 41.1 per cent, respectively. For the six-month period ended September 2007, NTIL reported a net profit of Rs 74 million on a turnover of Rs 386 million.

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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