Ratings agency Standard and Poor's raised TATA Steel's long term corporate credit rating a notch to 'BB' with a stable outlook on the back of the company's sound financial profile and strong cash flows.

The rating firm said that "S&P's Ratings Services said that it had raised the long term corporate credit rating on TATA Steel Ltd to 'BB' from 'BB-'. The outlook is stable.

A 'BB' rating suggest moderate default risk. Meantime, the rating firm has affirmed 'B+' long term corporate credit rating and 'B' short term rating on TATA Steel's European subsidiary, TATA Steel UK Holdings Ltd with a stable outlook.

Standard & Poor's credit analyst Mr Mehul Sukkawala said that "We raised the rating on TATA Steel because we expect the company to sustain the improvement in its cash flow protection measures in the current financial year. We anticipate that TATA Steel's cash flows will further improve in FY13 due to the commissioning of brown field expansion.”

He also said that S&P had revised company's financial risk profile to 'significant' from 'aggressive' due to its deleveraging measures and higher cash flows.

Deleveraging occurs when the debt component in the balance sheet is reduced through fresh equity infusion or through sale of assets to part repay the debt amount.

The credit rating agency said that TATA Steel's deleveraging measures in the last fiscal has offset negative working capital issues and improved its liquidity.

(Sourced from ET)