Moody’s revises JSW, Tata Steel outlooks

Moody’s Investors Service has changed JSW Steel’s ratings outlook to stable from positive, and vice versa on Tata Steel.

While a stable outlook indicates a low likelihood of a rating change over the medium term, a positive one indicates a higher likelihood of a rating change over the same period.

Kaustubh Chaubal, senior VP, Moody’s, said JSW’s upgrade reflects the company’s continued strong operating performance and consistently strong credit metrics while maintaining good liquidity.

“Today’s outlook change to positive reflects Tata Steel’s track record of delivering a solid operating performance while maintaining conservative financial policies; and the likelihood that upward rating pressure will build over the next 12 months if recent performance and credit metrics improvements are sustained,” said Chaubal.

Moody’s said JSW Steel’s ratings upgrade also reflects the successful commissioning of the company’s five million tonne per annum brownfield expansion at Dolvi in November 2021 and its ramp-up thereafter, which will translate into at least a 20% increase in steel shipments during the current fiscal year.

“Tata Steel’s well-laid-out capital allocation policy that prioritizes debt reduction over capital expenditure and new investments underscores our positive outlook. The substantial debt reduction achieved over the last two years, as well as the reduction to come over the remainder of fiscal 2023, will greatly improve the company’s financial flexibility and resilience and position it for an investment-grade rating,” said Chaubal, adding Tata Steel is poised to reduce its debt by at least $1 billion in the fiscal year ending March 2023.

Noting that market conditions will gradually moderate over the next 12-18 months, Moody’s said, “Rising global interest rates to curb inflation and an increase in Indian steel export taxes have somewhat dampened steel prices.”