CRISIL has assigned a CRISIL IPO Grade "3/5" (pronounced "three on five") to the proposed initial public offering of V-Guard Industries Ltd. (V-Guard). This grade indicates that the fundamentals of the issue are average in relation to the other listed equity securities in India.

V-Guard dominates the stabiliser business in southern India, with a high market share and brand recall; it has a growing presence in the small-ticket electronic and electrical goods industry in general. The grading also factors in the strengths of the company's model of outsourcing stabiliser manufacture, which has ensured high margins in past years.

However, the company has had limited success in products other than stabilisers; its move into the fragmented and price-sensitive LT power cable segment will therefore prove challenging. V-Guard's proposed expansion into the northern market is likely to pose its own set of obstacles: the company will compete with established brands, and will find it difficult to replicate its outsourcing model in the north, where it does not have relationships with an established base of contract manufacturers. While the management has succeeded in building a strong presence in southern India, its approach to capturing and exploiting market potential has been—to a large extent—reactive. Success in the proposed expansion will thus require more aggression and dynamism than the management has yet demonstrated. 

Sourced From: CRISIL Limited