Said CARE in a press release: "The upgrade takes into account the shift in Sicom's lending policies from project to corporate finance, the demonstrated support by government of Maharashtra (GoM) with the renewal of long term subordinated loan at concessional interest rate and the improvement in the asset quality parameters during the 2000 fiscal. However, despite improvements in the 2000 fiscal, managing asset quality remains the single biggest challenge before Sicom in the medium term."

Sicom was promoted by the GoM with the objective of industrialising the backward areas of Maharashtra through promotion of small- and medium-scale ndustries.

In 1969, the GoM divested 51 per cent stake in favour of Unit Trust of India and other investors.

During the 2000 fiscal, Sicom earned a total income of Rs 297.40 crore and a profit after tax of Rs 18.8 crore. As on March 31, 2000, it had an asset base of Rs 2,007.90 crore and its capital adequacy was over 18 per cent.

The economic slowdown during 1997 and 1999 fiscals had affected the quality of Sicom's loan portfolio, consisting mainly of project finance. Sicom has been very selective in fresh lending in the last two years. Also, to improve its overall risk profile, the company concentrated on short- and medium-term lending to the better rated corporates.

To further diversify risks, it is also lending to companies operating outside Maharashtra.

Sicom also concentrated on improving recoveries. This resulted in reduction in NPAs from 16.8 per cent to 14.1 per cent. The reduction in NPAs is more significant as it has been achieved without significant increase in asset base.

The GoM had retained the proceeds of Rs 230.10 crore received from Sicom's disinvestment in 1996, as a medium term loan. The GoM, in June 2000, agreed to change the character of the loan to that of a `sub-ordinated debt' which will carry very low rate of interest and also extended the maturity period. This has improved Sicom's resource profile and capital adequacy.

Meanwhile, CARE has assigned an `CARE AA-(SO)' rating to the Rs 1,500 crore non-convertible debenture programme of Sardar Sarovar Narmada Nigam Ltd. The rating agency has also assigned a `PR1' rating to the Rs 5 crore commercial paper programme of Gati Ltd, for a maturity not exceeding one year.