CRISIL has assigned its 'AA/Stable' rating to the Rs 1,000 million non-convertible debenture of Tube Investments of India (TI), and has reaffirmed its rating on TI's other debt instruments and bank loan facilities at 'AA/Stable/A1+'.

CRISIL's ratings continue to reflect TI's healthy business risk profile, marked by its diversified revenue streams and leading market position in most of its businesses. The ratings are also supported by TI's adequate financial profile and the healthy financial flexibility enjoyed by TI, which is one of the leading companies of the Murugappa group. These rating strengths are partially offset by vulnerability of the company's profitability to intense competition and cyclical slowdown in the automobile sector. Furthermore, a large proportion of TI's capital employed is deployed in investments, which are not providing adequate returns.

CRISIL believes that TI's business risk profile will continue to benefit from its well-diversified revenue profile, including the expected synergies from acquisition of SGL. CRISIL also expects TI's revenues and profitability to improve over the medium term, supported by the intent of TI's management to maintain a prudent financial policy that may help restore its debt protection metrics to more comfortable levels.

The outlook may be revised to 'Positive' if TI generates sizeable proceeds through sale of non-core assets, or if it reduces its exposure to group companies, and utilises proceeds to lower its debt, benefitting the debt protection metrics. The outlook may be revised to 'Negative' in case of lower-than-expected cash generation, or continuing high debt, leading to delay in correction in TI's debt protection metrics.

Shares of the company gained Rs 29.85, or 10.55%, to trade at Rs 312.80. The total volume of shares traded was 59,758 at the BSE (3.03 p.m., Wednesday).