Mumbai: Brickwork Ratings India Pvt Ltd has downgraded Tata Steel Ltd as part of a review.

The ratings company on 27 October 2016 revised the company’s credit rating to BWR AA from BWR AA+ for NCD (non-convertible debenture) issues of Rs4,000 crore and BWR AA- from BWR AA for the perpetual debt issues of Rs2,500 crore of Tata Steel, with a negative outlook, Tata Steel said in a statement.

“While the company clarified its position vide its press release dated October 27, 2016, according to Brickwork, the ratings change has resulted due to the uncertainty consequent to the recent change in top management at holding company/group level which could slow down vital decisions such as cost cutting and deleveraging the balance sheet concerning the unprofitable UK operations and restructuring of the European business," Tata Steel said.

Offering a rationale for the rating downgrade Brickwork said, “Essentially the rating reflects the heightened management risk and the current stage of lack of clarity at group level management that may impact strategic decision making at Tata Steel."

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It said even as the agency has taken into consideration all the positives including company’s diversified product portfolio, backward integrated India operations in the form of captive iron ore and coal mines making it one of the lowest cost producers of steel, large market share in steel Industry, among other factors, the rating is however constrained by the sluggish demand growth in Europe, volatility in prices of raw material and high dependence on imports of raw material for European operation. “The rating is also constrained by high consolidated financial leverage with overall deterioration in gearing, primarily due to the loss-making UK operations," it said.

On 24 October, Tata Sons, the holding company of $103 billion Tata Group, announced replacement of chairman Cyrus P. Mistry with immediate effect appointing Ratan Tata as its interim chairman for four months till the selection committee finds a new chairman.