BackTata Steel share price rises 2% as Moody's upgrades Tata Steel's corporate family rating to Baa3, outlook stable
Moody's upgrades Tata Steel's rating to 'Baa3', citing solid market position in India and deleveraging efforts.
PremiumTata Steel share price rose over 2 per cent in early trade on BSE on Tuesday after Moody's Investors Service upgraded its corporate family rating. Tata Steel share price opened at ₹129.70 against the previous close of ₹127.35 and soon rose over 2 per cent to the level of ₹130.05 on BSE.
Moody's Investors Service, a global rating agency, on Monday (September 25) upgraded the corporate family rating of Tata Steel from ‘Ba1’ to ‘Baa3’ and changed the outlook to ‘stable’ from ‘positive’.
"The upgrade reflects our expectation of the continued strength in Tata Steel's credit profile due to the company's solid market position in India. We expect the company's profitability to increase even as softer steel prices dent revenues," said Kaustubh Chaubal, a senior vice president at Moody's.
"The upgrade also reflects the company's considerable deleveraging through gross debt reduction and our expectation that Tata Steel will maintain conservative financial policies with a well-balanced capital allocation and financial metrics appropriate for its Baa3 rating," Chaubal added.
The rating agency highlighted that Tata Steel's Baa3 issuer rating reflects the company's large-scale, globally cost-competitive, vertically integrated steel operations in India, the sustained improvement in its European operations, especially following the expected closure of the loss-making upstream operations in the United Kingdom, and the company's close association with its parent, Tata Sons Ltd.
The rating also captures the company's exposure to the inherent volatility in steel prices and spreads, and the historically volatile performance of its European operations, Moody's said.
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Moody's pointed out that Tata Steel's strong presence in the world's second-largest steel market, India, will be a key driver of the company's credit profile. The rating agency believes India will see steel consumption climb at a 7 per cent cumulative annual growth rate until 2030, fueled by continuous, large infrastructure investments as well as increasing demand from the auto sector.
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Moody's said the upgrade to investment grade also reflects Tata Steel's resilient operations amid a challenging industry environment.
"During fiscal 2023, Tata Steel's EBITDA halved to ₹317 billion ($3.9 billion) from ₹657 billion ($8.8 billion) and its cash flow from operations declined by almost 60 per cent to ₹163 billion ($2.0 billion) from ₹399 billion ($5.4 billion). Still, the company's gross debt levels climbed by only 10 per cent, following the ₹120 billion ($1.4 billion) acquisition of Neelachal Ispat Nigam Limited, completed in July 2022. As such, gross debt was at 2.8 times EBITDA in fiscal 2023 versus 1.2 times in the previous fiscal," said the rating agency.
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Tata Steel share price has gained about 13 per cent in the current calendar year so far while the equity benchmark Sensex has gained about 9 per cent in the same period.
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Tata Steel reported a 92 per cent year-on-year fall in its consolidated net profit (attributable to owners of the company) to ₹633.95 crore for Q1FY24. The company's consolidated total revenue from operations fell 6.21 per cent to ₹59,489.66 crore during the quarter.
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