India Ratings (Ind-Ra) on
Tuesday said it has revised Tata Steel's outlook for non- convertible debentures to negative with the "risk of a substantial deterioration in the company's credit profile" caused by the COVID-19 containment measures.
The rating agency, however, considered Tata Steel to be well-equipped to cope with the impact of the coronavirus pandemic, with free cash of close to Rs 75 billion and committed credit lines against a short-term debt of Rs 80 billion at end-March, 2020.
"A prolonged lockdown of the businesses will lead to considerable curtailment of demand for an extended period, thereby impacting the companys credit metrics beyond FY21," Ind-Ra said in a note.
The outlook revision reflects "the risk of a substantial deterioration in the company's credit profile caused by the COVID-19 containment measures, and the overall impact of the lockdown on key end-user segments, including construction, infrastructure and automobiles," the rating agency said.
The steel maker Monday said it has approved a proposal to raise up to Rs 7,000 crore through non-convertible debentures (NCDs).
Tata Steel officials earlier indicated that the operation level at its key sites was at about 50 per cent during the lockdown.
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The agency expected the steel maker's "near-term profitability to be impacted" by both fall in metal prices and reduction in capacity utilisations.
"Along with inventory losses due to the falling metal prices, higher competitive intensity to exhaust the inventory build-up could exert pressure on gross margins," the rating firm said.
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