Fitch Ratings has upgraded the credit rating of TATA Steel and TATA Steel UK Holdings to stable from negative.

It said “The revised outlook reflects the improvement in performance of the company's operations in the first half this financial year.”

Fitch expects TATA Steel UK Holdings 's profitability to remain volatile; however, the value added nature of the product profile and greater discipline in use of production capacities is likely to mitigate the risks partially, it said.

The rating upgrade comes when the company recently proposed to raise INR 7,000 crore to deleverage its balance sheet and fund CAPEX.

TATA Steel posted a better performance in the first and second of this quarter with EBITDA margins of 44.5% and 36.9%.

The European operations have reported EBITDA profits for the past three quarters after recording EBITDA losses from Q4 FY09 to Q3 FY10, reflecting the sensitivity of the operations to raw material price volatility and the relatively slower improvement in demand in the European markets.

(Sourced from BL)