ICRA has assigned IPO Grade 3,indicating average fundamentals, to the proposed initial public offer of Consolidated Construction Consortium Limited (CCCL).

The company proposes to use the net proceeds of the issue for various purposes such as acquisition of construction equipment, investment in current/ proposed subsidiaries,expenditures towards Skill and Management Development Centre,repayment of loans & for other general corporate purposes.

The IPO grade assigned by ICRA reflects CCCL’s long track record of having successfully executed construction projects within the budgeted time and stipulated quality parameters. The grade also takes into account the company’s strong order book position, which along with the buoyant outlook on the construction industry, is expected to lead to healthy growth in revenues and profitability.

CCCL’s current financial position is strong, as indicated by its RONW of 25.7% for the year ended March 31, 2007. Thegrade is however constrained by the risks arising out of the concentration of CCCL’s order book on South India and the challenges involved in scaling up operations, given the increase in the level of activities and the company’s entry into new geographical locations. Moreover,CCCL’s activities are limited primarily to construction of commercial and industrial structures, in which the operating margins and profitability could be more vulnerable to competitive pressures. The grade also factors in the arrangement that CCCL has with a partnership firm owned by its promoters for the use of the “CCCL” brand name. This arrangement requires CCCL to pay 4% of its audited profits before tax (capped to Rs. 2 crore from 2007- 08 onwards) as licence fee to the said firm.

Incorporated in 1997 as a public limited company, by four exemployees of Larsen and Toubro (Mr.R. Sarabeswar, Mr. S.Sivaramakrishnan, Mr. V. G.Janarthanam and Mr. T.Seetharaman) under the name‘CCCL’, the company has concentrated on construction and related activities in commercial,industrial, residential and infrastructure sectors. CCCL has six regional offices with majority of its activities focused in southern India.

In order to provide turnkey construction solution to its clients,CCCL has set-up two subsidiaries -Consolidated Interiors Limited (for executing interior contracting and fit out services) & CCCL Infrastructure Ltd (for development of Special Economic Zones) – and has plans to set up another subsidiary under the name “Noble Consolidated Glazings Limited” for providing glazing services.
CCCL’s net profit for the year ended March 2007 was Rs.476.80 million on an operating income of Rs.8633.40 million as compared to net profit of Rs.189.90 million on an operating income of Rs.4252.20 million for the year ended March 2006.