SAIL's ratings will be reaffirmed to `LBBB+' (long-term), `MA-' (medium-term) and `A3+' (short-term). Icra had downgraded SAIL debt ratings in June this year to denote moderate safety for long-term and adequate safety for medium- and short-term ratings.

``The reaffirmation of SAIL rating factors is the explicit support from Government of India in the form of guarantees to SAIL's fresh borrowing programmes in order to meet its debt obligations, and takes into account SAIL's inherent strengths arising from large multi-unit operations, dominant share in the domestic steel industry, its continuously improving operating efficiency and a possible upswingin steel prices,'' senior Icra officials said.

Barely a month back, Crisil had downgraded the debt programme of SAIL -- consisting of seven bonds totalling to Rs 2,730 crore and one fixed deposit programme -- from `BBB' which indicated moderate safety (investment grade), to `BB', indicating inadequate safety (speculative grade).

``The downgrade reflects the deterioration in the financial profile of SAIL as a result of sustained downturn in the steel industry and large debt-funded capital expenditure programmes,'' Crisil said adding that any improvement in SAIL's long-term credit rating would depend on the nature and speed of the steel major's restructuring programme.

According to Crisil, the large cash losses over the last 15 months, continued support to loss-making subsidiaries and delays in Government approval for financial and business restructuring proposals have led to significant increase in leveraging. In the first quarter of 1999-2000, the public sector steel monolith had declared a net loss ofRs 610 crore on sales of Rs 3,376 crore, nearly 100 per cent up from a net loss of Rs 311 crore on a turnover of Rs 3,196 crore posted in the first quarter of the previous fiscal. Icra officials feel that the possibility of a rise in steel prices in the international markets, coupled with the indications of increasing demand in the domestic sector will help SAIL post better operational results in the second quarter. In addition to this, if the financial restructuring package is approved and sale of power plants other fertiliser units completed, the interest charges would reduce by more than half. That may ward off the steep downward slide in earnings of the company.

POINT COUNTER-POINT ON SAIL

ICRA: adequate to moderate safety