Fitch assigns grade 4 to Rashtriya Ispat Nigam IPO

Indicates above-average fundamentals, but is silent on suitability of issue process or adequacy of price

Fitch Ratings has assigned 'Fitch 4(ind)' grade to Rashtriya Ispat Nigam Ltd's proposed Initial Public Offering out of a maximum of 'Fitch 5(ind)'.

The grade indicates above-average fundamentals of the issue relative to other listed equity securities in India. The grading does not comment on the suitability of the issue process or the adequacy of the price, Fitch said in a release.

"The grading reflects RINL's position as one of India's largest producers of long product steel, the favourable medium-to-long-term demand outlook for its products - driven by increasing infrastructure spend and a healthy balance sheet," Fitch said.

"However, the economic slowdown in India in the recent past, especially in the construction and infrastructure sectors, could reduce domestic long steel demand in the short-term," it added.
   
The grading takes into account the fact that RINL is a public sector company and post IPO, the government of India (GoI) will remain the majority shareholder (90%) in the company.
   
The company was conferred 'Navratna' status by GoI in November, 2010, which provides a certain degree of operational and financial autonomy, it said.
   
The company has to bring out IPO before November as the Navratna status was subject to its getting listed within two years.
    
The IPO was to hit the market in last week of July. The launch has already been deferred once by three weeks, following the suggestions of the merchant bankers in view of subdued market conditions.
    
On June 13, a major explosion took place during the trial of a new oxygen control unit near the steel melting shop, resulting in the fire and the subsequent deaths of company officials.
    
Mohammad Haleem Khan, Secretary, Department of Disinvestment, recently told PTI that RINL's IPO will hit the street in the second or third week of July.
    
This will be the first PSU to tap the capital market this fiscal. The government is aiming to mop up Rs 2,500 crore by divesting its stake in the company.