Moody's upgrades JSW Steel outlook to positive from stable on growth plans

The earnings forecasts assume that JSW Steel's EBITDA per tonne will be around ₹10,500-10,750, which is in line with its 10-year average

Moody's Ratings upgraded its outlook on domestic steel major JSW Steel and its US-based arm Periama Holdings LLC to positive from stable.

The change in outlook reflects JSW Steel's meaningful expansion in operating scale, reinforcing its position as India's largest steel producer, Hui Ting Sim, a Moody's Ratings Assistant Vice President and Analyst said in a report on Wednesday.

Hui Ting Sim said the ramp-up of operations at recently completed projects will drive higher earnings and support sustained improvement in the company's credit metrics.

The rating action also reflects our expectation that JSW Steel will implement its growth plans with financial discipline, and it will proactively manage the refinancing of significant debt obligations, the analyst said.

"Moody's Ratings (Moody's) has changed the outlook on JSW Steel Limited (JSW Steel) and Periama Holdings LLC's (Periama Holdings) ratings to positive from stable," the report said.

On the rationale behind the move, Moody's said JSW Steel's production capacity grew by around 20 per cent over the past fifteen months to reach 35.7 million tonnes per annum (mtpa), with plans for a further increase of about 20 per cent by 2028.

In FY25, the company commissioned 6 mtpa of crude steel capacity in India. It also intends to add 2.2 mtpa at Vijayanagar and Salem through debottlenecking projects in the next 12 months, and an additional 5 mtpa at Dolvi and 0.5 mtpa at Bhushan Power and Steel Limited (BPSL) by FY28.

The substantial increase in JSW Steel's production capacity supports its ability to meet India's growing steel demand. India is the world's second-largest steel market, with steel consumption rising over 10 per cent annually for the past four years.

"We anticipate that steel demand in India will grow at a 5-7 per cent compound annual growth rate until 2030, fuelled by infrastructure spending, construction projects, and expansion in industrial production to meet the needs of a rising population," the report said.

Moody's said it expects higher sales volumes and profit margins to boost JSW Steel's earnings to about Rs 300 billion in fiscal 2025-26 and Rs 350 billion in fiscal 2026-27, from Rs 223 billion in fiscal 2024-25.

Following the commissioning of brownfield facilities over the last twelve months, the company estimates that its steel sales will climb to 28.5 million tonnes (mt) and close to 32 mt in fiscal 2025-26 and fiscal 2026-27, respectively, from 26.5 mt in fiscal 2024-25.

The earnings forecasts assume that JSW Steel's EBITDA per tonne will be around Rs 10,500-10,750, which is in line with its 10-year average.