Crisil said the revision in the rating of GIIC reflected the erosion in market value of investment portfolio, decline in collection efficiency of term lending/financial services operations resulting in increase in non-performing assets and large provisions/write-offs and an increasing asset-liability mismatch.

On the Arvind Mills issue, Crisil said the revision was on account of anticipated pressure on its profitability and gearing, which had affected its financial flexibility to meet large repayments scheduled over the next two years.

Crisil said the fall in denimrealisations, rising interest burden and a delay in the build-up of volumes in shirtings and knit-fabrics business was likely to impact the company's profitability and interest coverage ratio over the next two years.

The additional borrowings to fund the increased capital expenditure requirements and delays in cash inflows from reduction of its financial exposure to group companies and divestment of its non-textile assets was expected to keep the company's gearing level at higher than anticipated levels over the medium term, Crisil said.

In a statement, Crisil said the downgrading of the FD programme of GKW reflected the expected sustenance of the weakening performance of the various divisions of the company, its sharply deteriorated financial risk profile and fully stretched liquidity position. The revised rating also factors the company's continued exposure to the cement project and the delays in the cash flows expected in future from the sale of its large real estate holdings.