Icra has downgraded the various non-convertible debenture (NCD) programmes, totalling Rs 500 crore, of ACC from `LAA' to `LAA-', and the Rs 50-crore NCDs of GACL from `MAAA' to `MAA+'. Icra has also assigned an `LAA-' rating to the proposed Rs 200-crore NCD programme of ACC.

Icra has said in a press release: ``The downgrade of the long-term rating reflects the deterioration in the operating and the financial performance of ACC due to significant price erosion in its key markets, despite a strong overall consumption growth in the cement industry in 1999-00.''

India's cement consumption rose by over 15 per cent in 1999-2000 over levels in 1998-99. However, in the current fiscal, ACC's profitability was affected to a great extent by the decline in prices in the east and the south, and the lack of any significant growth in prices in the west and the north.

ACC was unable to match the industry consumption growth of over 15 per cent as its despatches grew by around seven per cent. This led to the marginal erosion in market share and resulted a net loss of Rs 58.85 crore during 1999-00, on net sales of Rs 2,381.64 crore.

In GACL's case, the rating agency was of the view that ``the revised rating reflects the change in financial risk profile of the company, resulting from increased borrowings and support to its affiliate companies, despite high and stable operating profitability and healthy cash accruals.''

Icra added that GACL's borrowings are likely to increase further as it may have to extend financial support to the group companies, in addition to funding its own on going capacity expansion programme.

GACL's operating profitability declined marginally despite over four per cent increase in average cement realisation. GACL has reported net sales of Rs 1,117 crore and a net profit of Rs 428 crore at the end of the first quarter of the current fiscal.