Fitch revises outlook on Tata Steel to stable
Apr 14 2014 , New Delhi
"The outlooks have been revised to stable from negative .... The Outlook revision reflects Fitch's expectations of improvement in TSL's (Tata Steel) financial profile in the near to medium term," Fitch Ratings Singapore said in a statement.
It affirmed the long-term foreign currency issuer default rating on Tata Steel at BB plus. The agency also affirmed the B plus long-term foreign currency issuer default rating on Tata Steel UK Holdings.
Fitch said Tata Steel’s strong cash generation is expected to support the company’s deleveraging over the medium term despite debt levels likely to peak in FY 2015 as the company expands its capacity in India.
"Fitch expects TSL's financial profile to moderate with net leverage improving to below 4x by the year ending 31 March 2015. Fitch expects TSL's strong cash generation to support the deleveraging over the medium term. This is even though debt levels are likely
to peak in FY15 as the company expands its capacity in India," it said.
Tata Steel is among the top ten global producers of steel with a capacity of over 29 million tonnes (MT) and has undertaken expansion drive.
Fitch said the commissioning of the first phase of its new plant at Odisha in the fourth quarter of FY 2015 will also support stronger earnings. The first phase of the new plant is expected to add 3 million tonnes per annum (MTPA) of capacity.
It also added that the performance of TSUKH (Tata Steel UK Holdings) has improved over the last four quarters and "Fitch's expectation of a sustained improvement in TSUKH's profitability is underpinned by the modest improvement in market conditions for western European steel producers and TSUKH's on-going cost rationalisation measures and improving product mix."