CARE grades construction companies

Mumbai: CARE, the rating agency, has begun rating construction companies and has assigned a CCt2+ grading to Bharat Engineering Company Ltd (MBEL), indicating that the project execution capabilities of the company are high.

Grading for the construction sector will be in the nature of performance rating, as distinct from credit rating, said a news release from the agency.

Grading will be an opinion on the ability of the respective entity to carry out the stated objectives within a specified timeframe. The exercise involves an evaluation of business and financial risks facing each entity, said the release.

This kind of grading will facilitate the short-listing and selection of quality players who can get empanelled with government departments as well as aid potential investors in making an objective assessment of the sector, thus enabling an increased flow of funds to the construction sector, CARE said.

The grading process will also help in reducing the time involved in tendering and bidding, as the project developer may invite bids only from the short-listed entities. The construction sector has been divided into four broad categories for the grading process - they are project developer, project consultant, construction contractor and the project. The grading will be assigned on a scale of 1 to 5 with specified symbols for each of the above categories - the construction contractors, for example, being graded on a scale from CCt1 to CCt5.

In MBELs case, an integrated project management company in India, the grading has factored in the long track record of the company, its experienced management, proven project execution capability, satisfactory order book position, unsatisfactory performance of its product division, low margins and its moderate financial condition, said CARE.