Fitch downgrades JSW Steel, Tata Steel to BB- from BB; outlook negative

Fitch Ratings has downgraded issuer default ratings (IDRs) of JSW Steel and Tata Steel to BB-minus from BB after completing a portfolio review.

Fitch has also downgraded Tata Steel UK Holdings' long-term IDR to B-minus from B. The outlook is negative. The agency has also downgraded JSW Steel's and Tata Steel's senior unsecured rating to BB-minus from BB.

Simultaneously, Fitch is withdrawing Tata Steel UK Holdings' long-term IDR because the company is no longer issuing debt and there is no Fitch-rated debt outstanding following refinancing by Tata Steel for its European operations in January.

The portfolio review follows Fitch expectation of a decline in steel demand in India for the year ending March 2021 (FY21), compared with its earlier assumption of a mid-single-digit volume increase, due to the economic impact of the coronavirus pandemic.

The Indian Steel Association has forecast an 8 per cent drop in domestic demand in FY21.

"We assume standalone sales volume for JSW Steel and Tata Steel will decline by 6 per cent. We also expect a lower EBITDA margin in FY21 due to the volume drop and weaker steel prices," said Fitch.

"We assume volume and margins will increase significantly in FY22 from a weak base, supported by a broader economic recovery," it said.