The rating agency has downgraded ITI's long-term rating to ‘Acuité BBB' from ‘Acuité BBB+' and the short-term rating to 'Acuité A3+' from 'Acuité A2'. The outlook on the same has been revised from 'stable' to 'negative'.

Acuite Ratings said that the rating downgrade is driven by the deterioration in operating performance of ITI during FY2023, reflected in its declining scale of operations and cash losses resulting in stretched liquidity.

The revenues stood at Rs 1448 crore in FY2023 (31% lower) against Rs 2081 crore in FY2022. The revenues have remained suppressed due to delays in getting PoC and technical clearances from the government authorities, along with delays in getting RoW permission from PWD.

Further, due to lower turnover, the company could not achieve the required margins to meet its fixed costs, resulting in cash losses and adversely impacting its coverage indicators and liquidity.

The rating, however, continues to draw comfort from the support and strong parentage, with the Government of India (GoI) holding a 90 percent stake in ITI and its support for ITI through the revival package and letter of comfort from DOT.

ITI manufactures telecom equipment including electronic switching exchanges, transmission equipment, microelectronic and telephone instruments to name a few. The company has six manufacturing facilities across India and three research and development units at Bengaluru, Karnataka.

The company reported a consolidated net loss of Rs 72.01 crore in the quarter ended March 2023 as against net profit of Rs 356.06 crore during the previous quarter ended March 2022. Sales declined 32.08% to Rs 775.26 crore in Q4 FY23 over Q4 FY22.