PINAKI MAJUMDAR
Jamshedpur, Sept 26: Moody’s Investors Service has assigned a Baa3 long-term issue rating to City-based Tata Steel Ltd.
Moody’s has also withdrawn the company’s Ba1 corporate family rating.
“The upgrade reflects our expectation of the continued strength in Tata Steel’s credit profile due to the company’s solid market position in India. We expect the company’s profitability to increase even as softer steel prices dent revenues,” said Kaustubh Chaubal, a senior Vice-President of Moody’s.
“The upgrade also reflects the company’s considerable deleveraging through gross debt reduction and our expectation that Tata Steel will maintain conservative financial policies with a well-balanced capital allocation and financial metrics appropriate for its Baa3 rating,” added Chaubal, also a lead analyst on Tata Steel.
Tata Steel’s Baa3 issue rating reflects the company’s large-scale, globally cost-competitive, vertically integrated steel operations in India (Baa3 stable); the sustained improvement in its European operations especially following the expected closure of the loss-making upstream operations in the United Kingdom (Aa3 negative); and the company’s close association with its parent, Tata Sons Ltd.
Nevertheless, the rating also captures the company’s exposure to the inherent volatility in steel prices and spreads, and the historically volatile performance of its European operations.
Significantly, Tata Steel’s Indian operations continue to dominate its consolidated earnings.
Although two-thirds of the company’s 28.8 million metric tons (mt) of global steel shipments in the fiscal year ending March 31 2023 (fiscal 2023) were in India, Tata Steel’s Indian operations accounted for over 80 % of the company’s consolidated EBITDA, a result of its backward integration into the mining of key raw materials iron ore and metallurgical coal.
