India Ratings cuts JSW Steel outlook, says liquidity will rise in FY20

India Ratings and Research (Ind-Ra) has affirmed JSW Steel Limiteds long-term issuer rating to IND AA and revised the company's outlook to negative from stable.

The rating on the company's Rs 53.51 billion NCD was also revised.

The outlook revision reflects Ind-Ra's view of a higher-than-expected fall in per tonne EBITDA (Earnings before interest, tax, depreciation and amortization) and consequent deterioration in JSW Steel's credit profile in FY'20.

JSW has announced reduction in the budgeted capital expenditure by about Rs 47 billion to about Rs 110 billion in FY'20 as a measure to conserve cash in the background of the current economic situation.

The company has also deferred capex at its Baytown facility in the US by around USD 240 million of the announced USD 500 million.

The rating agency expects outflows relating to any inorganic stressed asset acquisition in FY20 to be limited to Rs 50 billion and would primarily be executed through ring- fenced financial structures with only a minority stake by JSW Steel.

However, Ind-Ra expects the FY20 liquidity to remain adequate with well-planned debt refinancing amid substantial capital expenditure outflows by the company.

The agency highlights JSW Steel's significant cost advantage as the company benefits from locational advantages, low manpower costs and operational efficiencies.

"The company has a dominant market share in southern and western India. JSW strategic partnership with JFE Steel Corporation (Japan) for technology underpins the companys efforts to develop value-added products," Ind-Ra said in its rating note.