Similarly, the rating assigned to SAIL's fixed deposit programme has been downgraded to `FA+' from `FAA' and the rating assigned to SAIL's short term deposit programme has been downgraded from `P1+' to `P1', Crisil said in a statement here.

The revision in rating reflects the rating agency's concerns arising out of a steep erosion in the profitability of the company due to continued pressure on realisations - on account of lack of adequate demand as well as increase in competition - domestic and imports and also higher capital related charges, Crisil added.

A large modernisation programme which suffered cost and time overruns, could not be supported by the companys cash accruals resulting in large borrowings. These have affectedthe companys profitability adversely, as the envisaged benefits of modernisation are yet to materialise under the present sluggish market conditions, the rating firm said.

The large debt taken by the company will affect SAIL's financial position in the future. Accordingly, Crisil says that it expects a decline in the financial ratios of SAIL in terms of interest coverage etc in the medium term.

The ratings continue to factor in SAIL's position as the largest manufacturer of steel in the country - a position unlikely to be threatened in the medium term and the long term growth prospects of the industry.