ICRA upgrades JSPL’s ratings, its near-term margins to stay healthy

Wednesday, 30 December 2020 14:29:50 (GMT+3)   |   Istanbul

Indian rating agency ICRA has announced that it has upgraded the ratings of India’s Jindal Steel and Power Limited (JSPL) due to its improved consolidated capitalization amid its improving domestic steel operations. The company’s outlook has remained stable.

In the first eight months of the 2020-21 financial year, JSPL’s shipments increased by 13 percent year on year versus 30 percent year on year decline in domestic steel consumption in the first seven months of the given financial year, despite challenging market conditions amid the pandemic.

ICRA expects that the sustained volumetric growth together with an improvement in steel realizations amid the pick-up in domestic steel demand, soft coking coal prices, and access to royalty-paid iron ore fines inventory to keep JSPL’s steel spreads healthy in the near term.

The sale of the company’s Oman-based subsidiary Jindal Shadeed will reduce JSPL’s consolidated debt significantly.

Meanwhile, the ratings continue to be constrained by the vulnerability of the steel business to volatility in metal prices as well as the price and supply risks associated with coal and iron ore procurement. The company remains dependent on procurement from the open market for nearly 80 percent of its iron ore requirement. ICRA noted that the recent supply shortage in Odisha and the consequent surge in domestic iron ore prices would be a concern if these trends persist for a longer duration.

According to ICRA, the stable outlook on JSPL’s rating reflects the agency’s expectation that a continuing ramp-up in the company’s domestic steel volumes, together with access to raw material at favorable prices will facilitate a healthy performance in the near term.

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