Tata Steel ratings hike on firm steel prices

Standard and Poor’s (S&P) has upgraded Tata Steel and its subsidiary ABJA Investment Company’s long-term issuer rating from BB- to BB. Continued strength in steel prices has accelerated the company’s ratings, says S&P.

S&P observes that management’s commitment to deleveraging, supported by above-average strength in steel prices has helped Tata Steel to accelerate debt reduction as well.

“In the base case scenario, Tata Steel’s adjusted debt is expected to decline by over 30% by March 2023 from its March 2021 levels,” says the rating agency. “Tata Steel’s adjusted debt (including customer advances and securitised receivables, etc) will fall to about INR 60,000 crore ($8.09 billion) by March 2023 from about INR 91,500 crore as of March 2021.”

This would significantly outperform the company’s stated intention to reduce debt by at least $1 billion/year, and continue the trend of declining debt from March 2020, when the company reported INR 1.1 trillion in debt, Kallanish notes.

The company’s credit profile is further expected to rise over the next 3-4 years on the back of the ongoing 5 million tonnes/year capacity expansion at its Kalinganagar facility. The expansion will directly impact the rating as the facility accompanied with cold-rolled mill and pellet plant setup will be added without material debt and will raise the company’s profitability.

Sayed Aameer India