Crisil upgrades Jindal Stainless long-term debt ratings, keeps short-term

Rating agency's report highlighting reasons for upgrade pointed at the improvement in financial risk profile, supported by debt reduction

Crisil Ratings has upgraded the long-term bank facilities ratings of Jindal Stainless (JSL) to AA-/Stable. The previous assigned rating was Crisil A+/Stable. The rating of JSL’s short-term bank facilities have been reaffirmed at Crisil A1+.

Crisil Ratings also upgraded its rating on the long-term bank facilities of Jindal Stainless (Hisar) (JSHL) to ‘CRISIL AA-/Stable’ from ‘Crisil A+/Stable’, and also assigned its ‘Crisil A1+’ rating on the short-term bank facilities of JSHL.

“As per Crisil, this upgrade underlines significant improvement in business risk profile of JSL, along with Jindal Stainless (Hisar) Limited (JSHL), and a sustainable improvement in the operating efficiency of the company driven by better per tonne earnings before interest, taxes, depreciation, and amortization (EBITDA) levels,” a statement from JSL said.

“This upgrade acknowledges improvement in the financial risk profile of JSL, led by strong liquidity, deleveraged balance sheet, and minimal long-term debt obligation over the medium term. It factors in the market leadership position of the Jindal Stainless group (JSL and JSHL) in the domestic stainless steel industry in terms of manufacturing capacity, sales volume, and sizeable export presence,” the statement added.

Commenting on this development, Managing Director, JSL, Abhyuday Jindal said, “The Company has delivered a strong performance despite being susceptible to input cost volatility and cyclicality in the stainless steel industry, while competing with dumped Indonesian and Chinese imports. JSL is undertaking capex for brownfield expansion that will further improve its domestic and global footprints.”

The Crisil report highlighting reasons for the ratings upgrade pointed at the improvement in financial risk profile, supported by debt reduction, of JSL.

“Aided by healthy operating performance, JSL has been able to substantially reduce consolidated external debt to Rs 1,971 crore as on September 30, 2021, from Rs 3,488 crore as on March 31, 2019. JSHL also pared its consolidated debt to Rs 1,527 crore from Rs 2,367 crore, over the same period. Crisil Ratings understands that the group reduced debt in such a way that bulk of the scheduled term debt obligation over the next two fiscals are already paid and it has only about Rs 245 crore of scheduled payments to be made till end of fiscal 2023. This provides the group sufficient cushion to absorb ongoing capex and underpins the management’s strong focus on debt reduction,” the Crisil report said.

“Consequently, the interest coverage ratio improved to 4.4 times in fiscal 2021, from 2.6 times in fiscal 2019, at the group level. The same has further improved to around 13 times in the first half of fiscal 2022,” the report added.