Two NCD programmes of Jisco amounting to Rs 470 crore have been downgraded to triple-B+ from A+. Prior to the downgrade, the instruments of both the companies were put under rating watch with developing implications.

JSL's revised ratings reflect Crisil's concerns arising out of the increasing pressure on margins expected in the steel industry, including stainless steel, high level of debt usage which has lead to weakening of capital structure and increase in financial risk profile, further debt-funded expansion projects being implemented by the company and the substantial support expended to othergroup companies, especially Jindal Vijayanagar Steel Ltd (JVSL).

Jisco's revised rating is on account of higher financial risk arising out of a decline in credit quality of JVSL where Jisco has substantial funded and non-funded exposure. The company also has continued high levels of exposure to other Jindal group companies, high gearing and low interest coverage.

Crisil, in its outlook on steel industry ratings, has said that 1998-99 would be another rather difficult year for the Indian steel industry. "The debt-usage level for the industry, in general, is fairly high and in view of the pressures on volumes and realisations, which could aggravate further, Crisil anticipates outstanding ratings in the industry to come under further pressure," the rating agency states.

Crisil anticipates a further weakening of credit quality of Indian steel companies during the current year as the industry continues to be severely impacted by declining realisations and a surplus supply situation that is likely to worsenfurther in the near term. Also, the lacklustre growth rate in domestic consumption, significantly lower than anticipated offtake from infrastructure projects and progressively eroding cost-competitiveness of Indian steel manufacturers in the wake of the regional financial climate will add to the problem.

Crisil further believes that the Asian region would be faced with weakening demand and excessive supply, which could bring about further pressure on realisations and adversely impact the financial performance of the industry. Crisil has said that while growth in demand has been constrained, the industry has witnessed pressure on the cost structure by way of hikes in the prices of petroleum products and railway freight besides regular increases in power tariffs.

In the wake of the regional financial crisis, the Asian region witnessed some of the lowest price levels for steel and supplies also increased from manufacturers in the CIS countries, which has further aggravated an already adverse price situation.Indian steel companies on one hand are facing substantial anti-dumping duties being slapped on their products in the international market, and on the other are required to compete with cheaper imports in the domestic market.