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Tata Steel share price soars on rare double ratings upgrade

Tata Steel shares surged as much as 2.9 per cent on Wednesday, beating a 1.2 per cent gain for the broader Sensex index, after S&P Global Ratings raised Tata Steel to BB from BB- on Tuesday, following an upgrade in April. (Bloomberg)Premium
Tata Steel shares surged as much as 2.9 per cent on Wednesday, beating a 1.2 per cent gain for the broader Sensex index, after S&P Global Ratings raised Tata Steel to BB from BB- on Tuesday, following an upgrade in April. (Bloomberg)

  • Tata Steel shares have climbed 122 per cent this year, while rivals Jindal Steel & Power Ltd and Steel Authority of India are up 58 per cent and 89 per cent respectively

On account of second ratings upgrade by S&P Global Ratings, as reported by Bloomberg, Tata Steel share price shot up to the tune of 2.90 per cent in the morning trade session. Market observers said that the rise was based on sentiments fueled by the rare double rating upgrade of Tata Steel Limited. However, they maintained that the metal stock is highly bullish and expected further rise in the counter as steel prices are expected further go northward, fetching margin gains for the company that has helped the metal company to reduce its debt for the last one year. Experts maintained that this trend is expected to continue for next one to two years.

Speaking on the reason for sudden rise in Tata Steel share price Ravi Singhal, Vice Chairman at GCL Securities said, "This rise in Tata Steel share price is due to the short-term sentiment caused by rare double rating upgrade. However, financials of the company is still strong as steel prices have almost doubled in last one year, helping steel company to increase its profit margin and reducr its debt. In the last one year, its debt has gone down drastically and as metal prices are expected to further go upward, Tata Steel's debt is expected to come down by around 30 per cent by FY23."

The company’s shares surged as much as 2.9 per cent on Wednesday, beating a 1.2 per cent gain for the broader Sensex index, after S&P Global Ratings raised Tata Steel to BB from BB- on Tuesday, following an upgrade in April. Its dollar bond due 2028, one of India’s best performing notes, gained 0.3 cent on the dollar. However, Tata Steel share price came down paring morning gains as profit-booking triggered immediately after the end of opening bell.

Tata Steel shares have climbed 122 per cent this year, while rivals Jindal Steel & Power Ltd and Steel Authority of India are up 58 per cent and 89 per cent respectively.

Tata Steel is gaining from a steeel price boom globally and using this steel price rally to cut its borrowings. Tata Steel’s debt is expected to decline by more than 30 per cent to 600 billion rupees ($8.1 billion) by March 2023 from its March 2021 level, exceeding the company’s goal of reducing debt by at least $1 billion per year, according to S&P Global.

“The stable outlook reflects our expectation that Tata Steel will continue deleveraging to improve its resilience to downturns," S&P Global said in a statement.

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