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Journalism of Courage
MUMBAI, AUG 3: Rating agency, Crisil has downgraded the rating assigned to public sector steel firm, SAIL8217;s all outstanding bonds programmes aggregating Rs 27.42 billion to A8217; from AA-8216;. The company has posted losses of over Rs 311 crore for the first quarter of fiscal 1999.
Similarly, the rating assigned to SAIL8217;s fixed deposit programme has been downgraded to FA8217; from FAA8217; and the rating assigned to SAIL8217;s short term deposit programme has been downgraded from P18217; to P18242;, Crisil said in a statement here.
The revision in rating reflects the rating agency8217;s concerns arising out of a steep erosion in the profitability of the company due to continued pressure on realisations 8211; on account of lack of adequate demand as well as increase in competition 8211; domestic and imports and also higher capital related charges, Crisil added.
A large modernisation programme which suffered cost and time overruns, could not be supported by the companys cash accruals resulting in large borrowings. These have affectedthe companys profitability adversely, as the envisaged benefits of modernisation are yet to materialise under the present sluggish market conditions, the rating firm said.
The large debt taken by the company will affect SAIL8217;s financial position in the future. Accordingly, Crisil says that it expects a decline in the financial ratios of SAIL in terms of interest coverage etc in the medium term.
The ratings continue to factor in SAIL8217;s position as the largest manufacturer of steel in the country 8211; a position unlikely to be threatened in the medium term and the long term growth prospects of the industry.
