29 January 2008
CRISIL grade 2/5 for Prince Foundations IPO

Proposed issue of 6,226,600 equity shares, including greenshoe option, aims to raise Rs.2.5 to 2.75 billion

CRISIL has assigned a CRISIL IPO Grade '2/5' (pronounced 'two on five') to the proposed initial public offer of Prince Foundations Ltd (PFL). This grade indicates that the fundamentals of the issue are 'below average', in relation to other listed equity securities in India.

PFL has an established presence in the fast-growing Chennai realty market which has seen strong demand growth driven by the diverse industrial base in the city led by the IT/ITeS sector. Though the company was incorporated as recently as 2004, its promoters have sound experience of more than 20 years in the construction segment in Chennai, and enjoy good relationships with local authorities and customers. The company has shown healthy growth in turnover and profits in the last three years, thanks to the buoyancy in the sector.

However, PFL's operations are restricted largely to Chennai which makes it vulnerable to any downturn in the real estate market in the city. PFL's earnings prospects in the next few years will be critically dependent on its ability to scale up human resources and systems for the timely execution of projects. Moreover, the recent sharp increase in property prices in Chennai has adversely affected affordability. Also, PFL faces stiff competition, with the entry of larger players in Chennai. One of the promoter and key management personnel are owners of the land in case of some joint development projects which could lead to potential conflict of interest.

About the company
PFL was incorporated as a private company in February 2004. Since inception, the company has completed four projects with a total saleable area of nearly 1 million square feet. At present, it is building

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three projects with a total developable area of 2.5 million sq ft. In addition, the company has planned projects of 5.8 million sq ft. The proceeds of the IPO will be utilised for the development of future projects. PFL's promoters, Mr. Ashwin Kamdar and Mr. Sharad Vasanji, have more than two decades of experience in the construction and metals trading businesses. After the IPO, the share of the promoters will decrease to 84.75 per cent (83.5 per cent if green shoe option is exercised) of the enhanced capital from 100 per cent now.

For the year ended March 31, 2007, PFL registered a net profit of Rs.211.7 million on a total income of Rs.665.4 million, as against a net profit of Rs.112.3 million on a total income of Rs.483.6 million in the preceding financial year.

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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January 29, 2008