JSW Steel hits new high on hope of strong recovery in operating performance

Moody's believe JSW will sustain the improvement over the next 12-18 months, enabling a recovery in its financial metrics to levels more appropriate for its Ba2 CFR.

Shares of JSW Steel, on Thursday, rose 5 per cent and hit a new high of Rs 490.95 on the BSE in intra-day trade after credit ratings agency Moody's Investors Service changed the outlook on all ratings of the company’s instruments to stable from 'negative', led by strong recovery in operating performance.

Moody’s, on Wednesday, has affirmed the JSW Steel’s Ba2 corporate family rating (CFR) and the Ba2 rating on the senior unsecured notes issued by the steel major. The rating agency also affirmed the Ba2 rating on the senior unsecured notes guaranteed by JSW and issued by its wholly owned indirect subsidiary, Periama Holdings.

"The rating affirmation and outlook change to stable are driven by a solid recovery in JSW's operating performance in the third quarter of fiscal year ending March 2021. We believe JSW will sustain the improvement over the next 12-18 months, enabling a recovery in its financial metrics to levels more appropriate for its Ba2 CFR," said Kaustubh Chaubal, a Moody's vice president and senior credit officer.

 "The rating action also reflects JSW's acquisition of Bhushan Power and Steel (BPSL), which we view as strategic to the business. BPSL's value-added product offering and proximity to JSW's iron ore mines will further strengthen the company's business profile while adding scale," adds Chaubal, who is also Moody's lead analyst on JSW.

In a separate regulatory filing, JSW Steel announced that the company has commenced production of Hot Rolled Plates from the new 5 MTPA hot strip mill facility at its Dolvi works. The Dolvi works has an existing capacity of 5 MTPA.

The company in another filing announced that it has completed the purchase of high-grade steel plates & coils (PCMD) business of Welspun for Rs 848.5 crore.  The transaction comprises the acquisition of the PCMD Business as a going concern on slump sale basis. The transaction closed on March 31, 2021. The PCMD Business will be of strategic importance for JSW to expand its value added and special products portfolio, particularly plate mill plates in which JSW has so far not been present, JSW Steel said.

In the past one month, the stock of JSW Steel outperformed the market by surging 20 per cent, against 0.11 per cent decline in the S&P BSE Sensex. In the last one year, it zoomed 240 per cent, as compared to 76 per cent rally in the benchmark index.