Tata Steel rose 2.13% to Rs 1215.10 after CARE Ratings upgraded the long-term credit rating of the steel major to 'CARE AA+; Stable' from 'CARE AA; Negative'.
The credit ratings agency said that the revision in rating and outlook assigned to the instruments of Tata Steel (TSL) factors in the improvement in performance witnessed during FY21, sequentially from Q2-FY21 onwards, particularly in Indian operations, on the back of revival in demand and increased steel prices leading to substantial cash flow generation and sizeable deleveraging at the end of FY21 resulting in improvement in debt coverage indicators.
TSL's European operations also, although had reported operating losses for whole of FY21, have witnessed improvement in profitability (from loss to profit) during Q4-FY21, largely on the back of significantly higher steel prices along with lower coking coal prices, which has more than offset the sharp increase in iron-ore prices.
Given the current price trend in Europe, the European operations are envisaged to report operating profit in near future as well. However, risk emanating from the downside risk in case of adverse movement in steel and raw material prices for the European operations continues to remain.
The rating continues to factor in the established track record of TSL as one of India's largest integrated steel manufacturing company with enriching product-mix having significant captive raw material security and global presence aided by geographically diversified production facilities.
Furthermore, TSL also enjoys immense financial flexibility by its virtue of being part of the Tata Group of Companies.
The above rating strengths are, however, moderated by company's presence in highly cyclical steel industry and exposure to foreign exchange risk.
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Tata Steel has presence across the entire value chain of steel manufacturing from mining and processing iron ore and coal to producing and distributing finished products.
On a consolidated basis, the steel major reported a net profit of Rs 6644.15 crore in Q4 FY21 as against net loss of Rs 1481.34 crore in Q4 FY20. Net sales during the quarter increased 39.4% year-on-year (YoY) to Rs 48950.89 crore.
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