JSW Steel debt-based leverage likely to rise in FY'20

JSW Steel Ltd's net debt-based leverage was expected to rise on the back of decline in per tonne EBITDA and outflows on account of debt-led capital expenditure, leading to a rating agency revising its outlook on the steel major.

The agency expects JSWs net debt-based leverage (adjusted net debt/EBITDA) to rise to 3.5x-3.7x in FY'20 on the back of decline in per tonne EBITDA and outflows on account of debt-led capital expenditure, India Ratings and Research (Ind-Ra) has said in a rating note.

In FY'19 and FY'18, the leverage was 2.2x and 2.6x respectively.

Ind-Ra has affirmed JSW Steel Limiteds (JSWL) long- term issuer rating at IND AA but the outlook has been revised to 'Negative' from 'Stable' since the last rating was issued in March, 2019.

The rating on Rs 53.51 billion NCD was also revised.

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 benign economic situation.

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

The rating agency expects outflows relating to any inorganic stressed asset acquisition in FY'20 to be limited to Rs 50 billion and primarily to be executed through ring- fenced financial structures with only a minority stake by JSW Steel.

Ind-Ra expected liquidity indicator was adequate as it expects the FY'20 liquidity to remain adequate with well- planned debt refinancing amid substantial capital expenditure outflows by JSW.