For arriving at the ratings, the agency has combined the business and financial risk profiles of NCC with those of its subsidiaries, Crisil said in its report.
The agency has downgraded the NCC Ltd rating to BB+/ Negative/Crisil A4+' from 'BBB/Negative/Crisil A3+'.
"CRISIL believes that the NCC Group's financial risk profile will continue to be under pressure over the medium- term because of the group's stretched working capital cycle, high interest costs because of continued high debt levels, and the weak operating environment," the agency said.
The ratings may be downgraded further if NCC Group takes longer-than-expected to reduce its debt levels, or if its operating performance is weaker than expected, it added.
"Conversely, the outlook may be revised to 'stable' if the group's short-term debt levels reduce significantly, or if there is a sustained improvement in its working capital cycle, thereby strengthening its overall credit risk profile," Crisil said.
The ratings downgrade reflects Crisil's belief that the NCC Group's continued high debt levels, combined with pressure on its profitability, will constrain the group's financial risk profile further over the medium-term.
The rating agency had earlier expected the group to reduce its debt by raising funds through divestments of its non-core assets, infusion of equity capital, and freeing up of some working capital over the medium-term.
"In the current depressed business scenario, continued adverse investor sentiments, and challenging macro-economic environment, Crisil now believes the debt reduction will take longer than expected; and group's debt protection metrics will further deteriorate over the medium-term," according to the report.
Crisil has not combined the business and financial risk profiles of the NCC group's project Special Purpose Vehicles (SPVs), as the project debt is non-recourse in nature and as the group's management has stated that NCC will not extend any additional support to these SPVs.
The ratings continue to reflect the NCC group's established market position across diverse construction segments and its healthy order book. These rating strengths are partially offset by the group's below-average financial risk profile, and its exposure to relatively risky infrastructure development and real estate projects, it said.
As on December 31, 2013, the NCC group had order book of around Rs 19, 600 crore, which is more than three times its revenues in 2012-13.
NCC has a track record of timely and smooth implementation of diverse construction projects in the civil and industrial construction segments. It is also present in the metals, mining, power, and oil and gas sectors, the report said.