India Ratings and Research (Ind-Ra) has upgraded Tata Steel’s long-term issuer rating to AA+ from AA, the highest level of safety regarding timely servicing of debt obligations, a statement from the rating agency said on Thursday, December 16.
“The upgrade reflects its expectation that, despite likely aggregate capital expenditure of about INR 220 billion ($2.9 billion), Tata Steel's consolidated adjusted net leverage will improve as significant cash flow generation will lead to a reduction in its consolidated gross debt,” the agency statement said.
Regarding the outlook for the steel sector, Ind-Ra said that domestic consumption growth is expected to continue in the financial year 2021-22, underpinned by demand growth from the construction, real estate, automotive and consumer durables segments, and high government spending on infrastructure.
Similarly, export opportunities are likely to remain strong, backed by China's removal of its export rebate amid capacity moderation to address environmental concerns.
However, the agency expects normalisation of metal prices and moderation in per-mt margins during the second half of the next fiscal year due to weak international prices, raw material cost deflation and improved domestic demand-supply dynamics.