Ashtavinayak Cine, Minar Intl maiden floats get Crisil rating

Ratings agency Crisil has assigned maiden gradings to initial public offerings (IPOs) of two medium-sized enterprises.

The two companies "� Shree Ashtavinayak Cine Vision Ltd (SACVL) and Minar International Ltd "� have been assigned grade 2 on a scale of 5 which implies that their fundamentals are "below average".

These are the first gradings assigned to IPOs since the Securities and Exchange Board of India (Sebi) introduced a system of grading. Crisil IPO gradings are assigned by Crisil Research with grade 5 representing strong fundamentals and grade 1 poor fundamentals.

SACVL is into film production and film distribution in Mumbai territory, while Minar is an exporter of made-up textiles to the US.

The grading of SACVL is constrained by the risks inherent in the Indian film industry where entry barriers are low and the susceptibility of the business model to both rapid changes in audience tastes and preferences and uncertainties arising out of the rudimentary methods used for arriving at the value of a film and its components.

In addition, the company has a relatively short three-year track record of proven performance and has a relatively under developed corporate governance system.

SACVL reported a net profit of Rs 7.47 crore in 2005-06 on operating income of Rs 60.34 crore against net profit of Rs 35 lakh on operating income of Rs 26.55 crore a year earlier.

Minar's grading reflects the good track record of the promoter U K Nambiar, who has a cumulative experience of over 40 years in textiles business, and the strong growth prospects for export of made-up textiles from India to the US which is expected to nearly double over the next five years.

Minar's grading is constrained by the company's high dependence on the skills of Nambiar for business continuity, the lack of adequate experience in setting up or running large textile manufacturing facilities, the inexperienced second rung of management and a challenging business environment post removal of quotas, as large US buyers prefer larger vertically integrated suppliers.

Crisil said the grading also reflects the lack of adequate corporate governance systems in the company, the existence of other promoter-owned entities in similar lines of businesses and the past instances of legal non-compliance by the company.

For the nine months ended December 2005, Minar reported a net profit of Rs 9 crore on operating income of Rs 243 crore.