Moody’s Investors Service has revised the outlook for India’s Tata Steel to ‘positive’ from ‘stable’, a statement from the rating agency said on Tuesday, June 28.
“The outlook change to positive reflects Tata Steel's track record of delivering a solid operating performance while maintaining conservative financial policies and the likelihood that upward rating pressure will build over the next 12 months if recent performance and credit metrics improvements are sustained,” the statement from the agency said.
Moody's expects the company to reduce its debt by at least $1 billion in the fiscal year 2022-23, aligned with its publicly articulated capital allocation policy.
“Tata Steel's well-laid-out capital allocation policy that prioritizes debt reduction over capital expenditure and new investments underscores our positive outlook. The substantial debt reduction achieved over the last two years, as well as the reduction to come over the remainder of fiscal 2023, will greatly improve the company's financial flexibility and resilience and position it for an investment-grade rating,” it said.
Moody’s said rising global interest rates to curb inflation and an increase in Indian steel export taxes have somewhat dampened steel prices and that its forecasts for Tata Steel are based on the rating agency's current price sensitivities for steel at $880/mt for Tata Steel's Indian operations and $1,250/mt for Europe for the fiscal year 2022-23.