The revised rating reflects a sharp deterioration in the company's risk profile due to declining automobile sales owing to the delay in the revival of the demand in the domestic automobile industry, Crisil said.

The company's large ongoing debt-funded capital expenditure programme and its entry into the premium car segment, where the demand has been lower than anticipated, has all been factored into the rating, Crisil said in a statement here today.

The rating agency added that the above factors had a significant impact on the company's profitability and strained its cash flows and ability to honour financial obligations in the future.

Meanwhile, the outstanding rating ofJK Industries' non-convertible debenture (NCD) issues of over Rs 140 crore were also downgraded by Crisil from `BBB+' to `BB+' on account of the continuous increase in financial risk.

The rating revision takes into account the high gearing levels, low coverage levels and large repayments compared to cash accruals, Crisil said. The rating revision reflected the large exposure of the JK Industries in other group companies that were not yielding any cash returns, Crisil stated.

Given that the tyre business constitutes over 80 per cent of the company's total turnover, the rating has also taken into account the recessionary conditions in the industry and the resultant squeeze on margins.

The company's subidiary, Vikrant Tyres Ltd, was also in the midst of a large debt funded expansion programme, Crisil added.

JKIL's gross sales of Rs 155 crore, during the 15 month period 1998-99, also comprises revenues from its sugar, agro-genetics and trading businesses.