India Ratings upgrades Tata Steel to 'IND AA+'; outlook 'stable'

The ratings agency said that reducing exposure to loss-making overseas units, sustained positive free cash flows at European operations are positives for the steelmaker

Tata Steel on Thursday said that India Ratings and Research has upgraded the company's long-term issuer rating to 'IND AA+' from 'IND AA' with 'stable' outlook.

India Ratings said that the upgrade reflects its expectation that, despite likely aggregate capex of about Rs 22,000, TSL's consolidated adjusted net leverage (adjusted debt net of cash/EBITDAR) would improve and hover between 1.0x-2.0x in FY22 and FY23 (FY21: 2.7x; FY20: 6.0x), as significant cash flow generation would lead to a reduction in its consolidated gross debt.

The ratings agency said that reducing exposure to loss-making overseas units, sustained positive free cash flows at European operations, leading to lower refinancing requirements at overseas group entities, and the consolidated adjusted net leverage falling below 2.0x, on a sustained basis, may lead to a positive rating action.

However, sustained weak profitability of the European operations, substantial debt-led acquisitions and or higher-than-expected capex outflows, leading to the consolidated adjusted net leverage exceeding 3.0x, on a sustained basis, would lead to a negative rating action, Ind-Ra said.

Tata Steel group is among the top global steel companies with an annual crude steel capacity of 33 million tonnes per annum.

The company recorded a consolidated net profit of Rs 12,548 crore in Q2FY22 as against a net profit of Rs 9,768 crore in FY22, registering a growth of 28.5% on QoQ basis. Total revenue from operations rose by 12.9% QoQ to Rs 60,283 crore during the quarter. The steel maker's net profit and revenue have risen by 7.5 times and 54.8%, respectively, in Q2FY22 as compared with Q2FY21.

The scrip rose 0.21% to currently trade at Rs 1156.30 on the BSE.