Fitch Upgrades Outlook for JSW Steel & Tata Steel
Fitch Ratings has upgraded the outlook or two Indian steel giants JSW Steel & Tata Steel. Fitch Ratings revised the Outlook on India's JSW Steel Limited's Issuer Default Rating to Positive, from Negative, while affirming the IDR at 'BB-'. Fitch Ratings has also upgraded India's Tata Steel Limited's Issuer Default Rating to 'BB', from 'BB-' with Stable Outlook.
For JSW Steel, Fitch Ratings said “The Outlook revision is based on our estimate that JSWS's leverage in the financial year ended March 2021 (FY21), excluding the impact of the Bhushan Power and Steel Ltd acquisition, was materially lower yoy and compared with our previous expectations. We also expect leverage to continue to decrease. We expect JSWS's EBITDA to rise further from FY22, driven by higher volumes after adding capacity of 5 million tonnes per annum or more than a quarter of current capacity, from mid-FY22. We expect limited impact on JSWS's steel output despite a resurgence in Covid-19 cases in India and see upside risk to our FY22 margin assumption, if robust steel prices are sustained. Capex is also likely to increase after a cut in FY21 as the company re-focuses on growth. Although we have assumed higher capex from FY22, a further increase in JSWS's spending plans remains a risk as our expectation for leverage implies that it will stay well within company's net debt to EBITDA ratio target of 3.75x.”
For Tata Steel, Fitch Ratings said “The upgrade follows a significant improvement in TSL's financial profile in the financial year ended March 2021, driven by a jump in margins following a faster recovery in the global steel market from the impact of the coronavirus pandemic than we expected. Leverage, based on our estimate of gross debt/EBITDA after adjusting for items such as leases and long-term customer advances, was around 3.5x in FY21, sharply lower than the 7.5x in FY20. We expect TSL's leverage to remain stable over the next three years.”