Fitch Ratings has revised the outlook of Indian steelmaker JSW Limited’s issuer default rating (IDR) to positive from negative, while re-affirming the IDR at ‘BB’ from ‘BB-’, according to a report put out by the rating agency on Thursday, May 20.
Fitch said that its outlook revision was based on its estimation of JSW’s leverage in the financial year ended March this year, excluding the impact of the acquisition of Bhushan Power and Steel Limited (BPSL). Fitch expects JSW’s leverage to continue to decrease, the report said.
JSW’s earnings before interest, tax, depreciation and amortization (EBIDTA) will rise further from the fiscal year 2021-22 driven by higher volumes after adding capacity of 5 million mt per year or more than a quarter of its present total capacity from the middle of 2021-22, the report said.
It said that it expected a limited impact from the resurgence of Covid-19 on the steel company’s output and sees an upside to margins if robust steel prices are sustained.
Capex is also likely to increase after a cut in 2020-21 as the company refocuses on growth. Although Fitch has assumed higher capex from 2021-22, a further increase in JSW's spending plans remains a risk, the report said.