Standard & Poor’s (S&P) has upgraded Indian steelmaker Tata Steel’s long-term issuer rating from “BB-“ to “BB” on significant expected deleveraging, the rating agency said in a report on Wednesday, August 4.
The outlook of the ratings is stable and reflects the view that the company can adequately deleverage to reduce volatility in credit metrics during industry downturns, the report said.
Continued strength in steel prices has accelerated deleveraging and in the base-case scenario, Tata Steel’s adjusted debt is expected to decline by over 30 percent by March 2023 from levels that existed in March 2021, the S&P report said.
While the company has increased capital expenditure, the increase is still small in relation to the operating cash flows and does not affect the path of deleveraging, the report stated.
The commissioning of the ongoing 5 million mt per year capacity expansion at the Kalinganagar steel mill in Odisha will significantly strengthen the credit profile over the next three to four years. This is especially so since the facility will be added without material debt and will improve Tata Steel's profitability with accompanying cold rolled mill and pellet plant facilities also being set up, S&P said.