The revised rating reflects increased financial risk on account of higher level of borrowings and continued pressure on steel and non-steel businesses due to slack domestic offtake. The higher borrowing is primarily on account of lower internal accruals combined with funding required for the Hospet Steel project.

This project was recently commissioned and is expected to provide Mukand with low cost steel, the benefits in terms of improved profitability and consequent capital structure correction needs to be demonstrated and iscritical for strengthening Mukand's financial position.

The rating continues to reflect Mukand's technological strength and diversified income availability of a substantial land bank. However, on account of the current depressed real estate market in Mumbai, benefits from the sale of land can be factored in only after the sale has been completed and funds realised. For the first quarter ended June 1998, Mukand had sales of Rs 163 crore and a net loss of Rs 3.5 crore.

Crisil has also downgraded rating assigned to the fixed deposit programme of TIDCO from "FAA+" to "FAA-". The revision in rating reflects the changing business risk profile of Tidco with increasing share of investment in large projects in infrastructure sector. Being the nodal agency for Government of Tamil Nadu to implement large core sector project in the state, Tidco is planning to increasingly invest in the equity of such projects which would increase the overall risk profile of its investments.

The market capitalisation of Tidco'sexisting investment portfolio has also declined steadily due to sluggish capital market conditions. Tidco's profitability, though improved marginally in 1997-98, has remained at low levels as many of the investments of Tidco are yet to yield any dividend returns. There has also been a steady increase in the leveraging of the company which is primarily due to transient short term cash surpluses of other state government entities being parked with Tidco.