Fitch affirms JSW Steel 'BB'; outlook negative

Fitch Ratings today affirmed JSW Steel Ltd long-term Issuer Default Rating (IDR) at 'BB' and said that the outlook remains negative.
The agency has also affirmed the company's senior unsecured rating and the rating on its USD 500 million 4.75 per cent senior unsecured notes due 2019 at 'BB', the rating agency said.
The ratings have factored in an improved industry outlook which is partly offset by higher estimated spending.
"JSWS's profitability in terms of consolidated EBITDA per tonne jumped by around 65 per cent y-o-y in 9MFY17, and its net debt/EBITDA leverage (unadjusted for acceptances accounted as trade payables) moderated to around 4x following an improvement in steel prices since the lows of December 2015," it said.

"Leverage had jumped to 6.4x in financial year 2016 (FY16, to end-March 2016), from 3.9x in FY15, as the company suffered from weak steel prices which hit profitability," it said.
High leverage in FY16 was also driven by the company's debt-funded expansion of capacity, which increased by around 25 per cent.
"We think downside risks for steel industry profitability are lower-based on recent developments while JSWS's plans to boost capacity further through a mix of organic expansion and acquisitions may result in relatively high leverage and negative FCF (free cash flow) over the next two years, weakening its credit profile. Hence, we maintain our negative outlook," it said.