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-ICRA rates fund based limits of PGM Infrastructures at LBB/A4.

BANKING AND CREDIT NEWS-February 14, 2011--ICRA rates fund based limits of PGM Infrastructures at LBB/A4(C)2011 M2 COMMUNICATIONS http://www.m2.com

14 February 2011 - ICRA has assigned LBB/"stable"/A4 ratings to fund based limits of PGM Infrastructures Pvt Ltd.

The agency issued the following press release:

Rating History

Instrument Amount Amount Outstanding Rating

In Crore In Crore As on January 11

Fund Based Limits (CC) 14.00 N.A. LBB (Stable)

Fund Based Limits (SLC) 3.00 N.A. A4

ICRA has assigned LBB (pronounced L double B) rating to the Rs. 14.00 crore1 Fund Based (Cash Credit) Bank Limits of PGM Infrastructures Private Limited+. The outlook on the long-term rating is Stable. ICRA has also assigned A4 (pronounced A four) rating to the Rs. 3.00 crore Fund Based (Standby Line of Credit) Bank Limits of PGM.

The ratings are constrained by the company's stretched financial profile as reflected by modest profitability levels with operating margins of 5.55% in FY2010, adverse capital structure with gearing of 3.11 times as on March 31, 2010 and low coverage indicators. The ratings are further constrained by the high competitive intensity in the industry arising out of its fragmented nature coupled with the competitive bidding system; the high working capital intensity of operations leading to consistently high fund based limit utilization and the sectoral concentration risk with the company focusing on construction of buildings in the past. ICRA notes that the company's profitability remains vulnerable to escalation in the key raw material prices; however the provision of Price Variation Clause in a majority of contracts mitigates the risk to a large extent. The ratings, however, draw comfort from the established position and track-record of the promoter group in the construction industry, diversified geographic presence of the company which is expected to improve further in the near term and the healthy order-book position with unexecuted work of over Rs. 400 crore providing visibility to sales in the near term. Moreover, the successful completion of the company's order-book, which largely comprises of projects in sectors like roads and irrigation, is expected to diversify the company's business mix in the future. Going forward, with the increase in scale of operations, the company's ability to manage its capital structure and liquidity position given the working capital intensive nature of positions remains critical from a credit perspective.

Company Profile

Incorporated in 2007, PGM Infrastructures Private Limited (PGM) is a private limited company engaged in the business of civil construction on a contract basis. The company is based out of Hyderabad, Andhra Pradesh; with the registered office being located in Rajahmundry, Andhra Pradesh. PGM was promoted by Mr. M.V.S. Ramu, Ms. M. Sujatha, Mr. M. Prasad and Mr. G. Surendranath. The company is a part of the Hyderabad based M-POT Group, which refers to a consortium of companies held by Mr. M.V.S. Ramu. The promoter group has been engaged in the construction business for about two decades through other group entities like Soubhagya Projects Limited and Sri Balaji Infra Corp Limited.

For the financial year ending March 2010, PGM reported an operating income of Rs. 116.50 crore and a net profit of Rs. 2.75 crore as compared to revenues of Rs. 33.60 crore and net profit of Rs. 0.84 crore in the previous year.

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Publication:M2 Banking & Credit News (BCN)
Date:Feb 14, 2011
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