CRISIL has assigned a CRISIL IPO Grade ‘3/5′ (pronounced ‘three on five’) to the proposed initial public offer of Tecpro Systems Ltd (TSL). This grade indicates that the fundamentals of the issue are average, in relation to other listed equity securities in India.

The grading reflects the sound operational and strategic abilities of TSL’s promoters in the material handling business. This is seen in the company’s emergence as a serious player in the Indian material handling market over the last 5 years to compete with well-established players like McNally Bharat Engineering Company Ltd and Tata Robbins Fraser Ltd.

The company has bagged repeat orders from many large clients and the promoters have been able to enter into technical tie-ups with global manufacturers to enhance TSL’s manufacturing footprint in the material handling business. The grading is constrained by uncertainties associated with the company’s plans in other business areas such as engineering procurement and construction (EPC) for small power plants, making fuel from municipal waste and running bio-mass plants given that TSL’s performance so far reflects their extensive operational involvement.

The grading also reflects the company’s rather complicated corporate structure that is characterised by the presence of separate corporate entities to carry out different activities in the same value chain. One instance is a promoter owned entity that carries out on-site erection activities, thereby creating a potential conflict of interest for the promoters. The grading also reflects the moderate corporate governance practices at TSL.