28 May 2008
CRISIL IPO grade 3/5 assigned to the IPO of RITES Limited

CRISIL has assigned a CRISIL IPO Grade "3/5" (pronounced "three on five") to the proposed initial public offer of RITES Limited. This grade indicates that the fundamentals of the issue are 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 RITES' business strength in the Indian rail consultancy and technical services segment and the potential to expand in the African continent through railway line concessions, export and leasing of rolling stock. The company has capitalised on its rail experience and has a modest presence in the other transport infrastructure segments like roadways, highways and ports, in the domestic market. Given its competitive strengths, it is well-placed to benefit from the large investments planned by Indian Railways and capital expenditure plans of steel and power players. Further, its access to the highly proficient and experienced railway employee pool, available on deputation, enhances its capability in the railway segment.

However, its ability to sustain its business position in the highly competitive urban infrastructure and transport segments is a key monitorable. Further, increasing competition from Chinese players in the export market could pose a threat to leasing, export and concession businesses in Africa. The grading also factors in RITES' limited experience in running rail concessions and the capital intensive nature of both the concession and leasing businesses.

Media Contact:

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

Analytical Contacts:

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

Chetan Majithia
Head, CRISIL Research
Phone: +91-22-6691 4148
Mobile: +91 97692 00201
Email : chetanmajithia@crisil.com

Client Servicing Contact:

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

RITES Limited has debtor days of 106 (of which 22 per cent is outstanding for more than 3 years), which exert pressure on its working capital. Receivables management becomes crucial given the large exposure to government bodies as clients.

About the company and the issue
RITES Limited was incorporated on April 26, 1974 as a private limited company by the Ministry of Railways. It provides engineering, technical and consultancy services for transport and infrastructure-related sectors and is also involved in the export, leasing and maintenance of rolling stock and other railway equipment. The company has entered into concession agreements to run specific railway lines in the African countries of Mozambique and Tanzania. Approximately, 50 per cent of its revenues is based in foreign currency (mainly in US $).

RITES Limited aims to raise around Rs 3.5 billion by this proposed public issue of 14,000,000 equity shares. (Of this, the dilution of 4,000,000 equity shares is by the President of India).

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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May 28, 2008