JSPL gains after credit ratings upgrade

Jindal Steel & Power said that the credit rating agency ICRA upgraded its rating on the long-term bank facilities of the company to '[ICRA] A+' with 'Positive' outlook from '[ICRA] A' with 'Stable' outlook.

The rating agency said has also upgraded its rating on the short-term bank facilities of JSPL to '[ICRA] A1+' from '[ICRA] A1'.

Following the announcement, the scrip advanced 1.75% to currently trade at Rs 364.25 on the BSE.

ICRA said that the rating upgrade factors in the company's sustained healthy and better-than-anticipated performance in recent quarters and a significant reduction in its debt levels, facilitating a material improvement in its credit metrics and liquidity profile.

ICRA expects the company's consolidated Net Debt/ OPBDITA to decline to less than 1x by March 2022 from 4.60x in March 2020 and 1.54x in March 2021 (over expectations of less than 2.0 times for March 2021).

Further, deleveraging and improvement in liquidity is estimated at an accelerated pace once the divestment of stake in its thermal power subsidiary, Jindal Power Limited (JPL), is concluded as per the revised terms of the deal. This remains a rating monitorable.

The company has a capital expenditure plan in Angul (Odisha) under a wholly-owned subsidiary, Jindal Steel Odisha (JSOL), at an estimated outlay of Rs. 22,300 crore (gross of input tax credit).

While this exposes the company to associated project risks, ICRA draws comfort from the company's established track record of over two decades in successful commissioning of greenfield/brownfield capacities and running its plants at healthy capacity utilisation.

The 'Positive' outlook on JSPL's long-term rating reflects ICRA's expectation of a strong operating performance over the next 12 months in line with the improved operating environment in the domestic steel sector. Together with a material decline in the company's scheduled repayment obligations, this is expected to result in a further improvement in the company's debt coverage metrics.

The ratings continue to draw strength from JSPL's established position as one of the leading steel producers in India with a sizeable presence in pelletisation, mining and captive power generation.

JSPL is an industrial powerhouse with a dominant presence in steel, power, mining and infrastructure sectors.

The company's consolidated net profit declined 73.5% to Rs 41.81 crore on a 62.8% rise in net sales to Rs 10,628.80 crore in Q1 FY22 over Q1 FY21.

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