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Journalism of Courage
MUMBAI, Aug 10: Crisil, a leading credit rating agency, has downgraded the rating of Tata Iron and Steel Company Tisco. The downgrading follows the 60 per cent fall in the net profit of Tisco in the first quarter of the current year due to the demand-recession in the steel sector.
The outstanding ratings of the non-convertible debentures and bond programmes of Tisco have been downgraded to AA8217; from AAA8217;. The FAAA8217; rating assigned to the fixed deposit programme has been reaffirmed. A quot;p1quot; rating has been assigned to Tisco8217;s Rs 300 crore commercial paper programme, according to a Crisil release.
The revised rating is on account of pressures on the steel division8217;s profitability due to sluggish demand, increased supplies and subdued prices. Moreover, the net income from the non-steel business has been declining and was negative in 1997-98.
The ratings continue to reflect Tisco8217;s strengths in terms of strong market position, good operating efficiency, cost advantages due to integrated nature ofoperations and its status as the flagship company of the Tata group. In Crisil8217;s opinion the management8217;s initiatives towards improvement of product-mix, reduction of costs, and control over inventory and debtor levels are well strategised.
Crisil also recognises the management8217;s efforts towards restructuring the non-steel operations and the headway made in the implementation of these initiatives. However, in view of the difficult business conditions gearing levels cannot be expected to decline significantly.
