CRISIL upgrades long-term ratings of Jindal Stainless

CRISIL Ratings has upgraded its rating on the long-term bank facilities of Jindal Stainless to 'CRISIL AA-/Stable' from 'CRISIL A+/Stable'.

The ratings agency has reaffirmed the company's short-term rating at CRISIL A1+'.

The Jindal Stainless group includes JSL, Jindal Stainless (Hisar) (JSHL) and their subsidiaries.

CRISIL said that the upgrade in the long-term rating factors in the significant improvement in business risk profile of the group with sustainable improvement in the operating efficiency driven by better per tonne EBITDA levels. This has also resulted in improvement in the financial risk profile led by strong liquidity, deleveraged balance sheet and minimal long-term debt obligation over the medium term.

The ratings continue to factor in the market leadership of the group in the domestic stainless steel (SS) industry, both in terms of manufacturing capacity and sales volume, and sizeable export presence. With a combined steel melting capacity of nearly 1.9 million tonne per annum (mtpa), the group is also among the top ten stainless steel manufacturers globally.

These strengths are partially offset by susceptibility of profitability to volatility in input cost, realisations and cyclicality in the SS industry. Business operations also face competition from cheaper Indonesian and Chinese imports. Substantial increase in imports may adversely impact realisation and volumes and hence remains a key monitorable.

The group is undertaking capital expenditure (capex) of Rs 2,600 crore over the next three fiscals to increase its SS melting capacity by 1 mtpa along with higher downstream capacities* and for improving cost efficiencies.

CRISIL Ratings understands that majority of this planned capex will be funded through internal accrual and hence will not cause any significant rise in leverage ratio. However, any further debt-funded capex or acquisition will remain a key monitorable.

JSL is one of the largest manufacturers of SS in India with steel melting capacity of 1.1 mtpa.

The company's consolidated net profit surged to Rs 407.47 crore in the quarter ended September 2021 as against Rs 81.73 crore during the previous quarter ended September 2020. Sales rose 51.68% YoY to Rs 5026.72 crore in Q2 FY22.

The scrip shed 0.43% to currently trade at Rs 197.20 on the BSE.

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