"It is too early to say we will certainly downgrade Telco since we have not received the entire details of the company's Q1 operations. But considering the net loss, we will certainly review the ratings," said senior officials at Crisil, which has rated Telco's Rs 115-crore seven-year secured NCD issue. Telco raised this money through the private placement route in November 1997 at a coupon of 12.25 per cent. However, Telco's Rs 300-crore commercial paper (CP) programme, which was assigned an A1+ rating by Icra, will not be affected by its poor performance during the first quarter of the current financial year.

"The CP programme is short term in nature.Though the Q1 operations are poor, the company has investments that can meet their repayment obligations," said rating analysts. Telco, for the first time, used the CP route to raise funds during 1997-98. The rating assigned by Icra is valid for one year from the date of acceptance. According to estimates, dated February 9, 1998, made by the Telco's lead bank State Bank of India, the company's total long-term funding of Rs 1,806 crore in 1998-99 is proposed to be raised through Rs 750 crore in debentures and other term loans, Rs 145 crore in foreign currency loans and Rs 911 crore through internal accruals.

The capital expenditure for Telco's small car project has been estimated at Rs 1,700 crore over a period of three years. Including the cap-ex proposed for the small car, the company has planned an increase of Rs 1,200 crore in fixed assets during 1998-99.

Telco's capital expenditure would go towards capacity expansion for existing products, creation of production facilities for its small car, Mint, andstrengthening of its research and development, and setting up production facilities at Dharwad in Karnataka for the manufacture of special-purpose heavy vehicles and construction equipment.

During 1997-98, Telco also securitised a part of its hire-purchase receivables aggregating Rs 272 crore with ICICI and Citibank in order to augment its net working capital. An in-principle decision has been taken by the company to securitise a major part of the remaining hire-purchase receivables on its books.