Press Release

May 18, 2011

CARE REAFFIRMS ‘CARE BBB-’ RATING ASSIGNED TO THE BANK FACILITIES OF SAPTHAGIRI EDUCATIONAL TRUST Ratings Facilities Amount Ratings1 Remarks (Rs. crore) Long-term Bank Facilities 44.27 ‘CARE BBB-’ Reaffirmed (Triple B Minus) Total Bank Facilities 44.27 Rating Rationale The rating continues to reflect the well-established operations of SET primarily driven by its well- known engineering college ‘Sri Sai Ram Engineering College’ (SEC), SET’s high margins translating into strong operating cash flows, healthy students-enrolment ratio of its engineering colleges and stability of revenues associated with educational institutions.

However, the rating is constrained by relatively small size of SET and large ongoing debt-funded capital expenditure program. The rating also takes into account the challenges involved in attracting students and retaining high-quality faculty, inherent cash flow mismatches faced by the trust (as bulk of the fee is collected in the months of June-September while the trust has to incur regular stream of payments towards salary, maintenance, debt servicing etc), uncertainty associated with seat sharing and fee fixation due to frequent changes in Government policies and the regulatory challenges involved in the educational sector in India. The rating also takes into account the constitution of SET registered under the Societies Registration Act.

Going forward, ability of SET to ensure completion of the project without any cost overrun/further time overrun, to maintain healthy students’ enrolment ratio so as to effectively utilise the existing as well as infrastructure which is being currently built, to maintain stable margins and changes in government policies with regard to tuition fee/seat sharing will be the key rating sensitivities. Entity Profile

M/s.Sapthagiri Educational Trust (SET) is an educational trust formed and registered in 1994, under the leadership of Mr M.Jothiprakasam (alias) MJF.Lion Leo Muthu, Chairman of SET.

SET operates ten educational institutions comprising two engineering colleges, a medical college (for Indian medicine such as Siddha, Ayurveda and Homeopthay), a matriculation school, one polytechnic college, four teacher training institutes and one shipping institute spread across different campuses in , and , Tamil Nadu. For the Academic Year (AY) 2010-11, SET had total student strength of about 7,408 students as against 5,700 students (approximately) in AY 2009-10.

1Complete definition of the ratings assigned are available at www.careratings.com and other publications of CARE Credit Analysis & Research Ltd., 4th Floor, Godrej Coliseum, Somaiya Hospital Road Sion East, Mumbai – 400 022. INDIA Tel # 022 6754 3456 Fax # 6754 3457

Press Release

Total operating income of SET grew by 23% in FY10 to Rs.36 cr. SET reported a Surplus of Rs.10 cr in FY10 as against Rs.11 cr in FY09. The overall gearing was moderate at 0.71x as at the end of March 2010.

In 11MFY11, SET reported fee receipts of Rs.41 cr as against Rs.33 cr for FY10, driven mainly by the growth in revenue from engineering colleges.

Analyst Contact Name: K. Karthik Raj Tel # 044 - 28497812 Mobile # 9940162244 Email: [email protected]

CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries /regulators or others are welcome to write to [email protected] for any clarifications. Disclaimer CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments.

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