India Ratings maintains negative outlook on Tata Steel

Ind-Ra expects the company's profitability to remain under pressure in the near term with slower volume growth in Europe

Maintaining its negative outlook on Tata Steel (TSL), India Ratings and Research (Ind-Ra) today said the profitability of the steel maker would remain under pressure in the near-term.

 

"Ind-Ra has maintained a negative outlook on TSL...The negative outlook reflects TSL's higher-than-expected net financial leverage in FY'13 together with uncertainty regarding deleveraging in the near-term," the rating agency said in a statement.

 

Net adjusted leverage of the company went up due to a decline in EBITDA margins in TSL's European operations to one per cent and Indian operations to 29 per cent, it said.

 

"Ind-Ra expects the profitability to remain under pressure in the near term with slower volume growth in Europe and lower growth trajectory in the Indian markets," it said.

 

The rating agency, however, said net leverage of TSL was likely to marginally improve in the short-term and recover in the medium-term with support from increased volume in domestic operations and stabilisation in European and South East Asian operations.

 

"TSL intends to manage its debt levels through internal accruals, divestments of assets and phasing out of capex. Any significant delay in deleveraging might be negative for the ratings," Ind-Ra said.