Credit ratings agency Moody's Investors Service has affirmed JSW Steel's Ba2 corporate family rating (CFR) and the Ba2 rating on the senior unsecured notes issued by the steel major.
Moody's also affirmed the Ba2 rating on the senior unsecured notes guaranteed by JSW and issued by its wholly owned indirect subsidiary, Periama Holdings. The outlook on all ratings was changed to stable from negative.
"The rating affirmation and outlook change to stable are driven by a solid recovery in JSW's operating performance in the third quarter of fiscal year ending March 2021. We believe JSW will sustain the improvement over the next 12-18 months, enabling a recovery in its financial metrics to levels more appropriate for its Ba2 CFR," said Kaustubh Chaubal, a Moody's vice president and senior credit officer.
"The rating action also reflects JSW's acquisition of Bhushan Power and Steel (BPSL), which we view as strategic to the business. BPSL's value-added product offering and proximity to JSW's iron ore mines will further strengthen the company's business profile while adding scale," adds Chaubal, who is also Moody's lead analyst on JSW.
The stable outlook reflects Moody's view that a benign operating environment and the company's enhanced capacity following the completion of its brownfield expansion will sustain an improvement in its performance such that leverage will trend below 4x over the next 12 months, indicating levels supportive of a Ba2 CFR.
Moody's does not expect JSW to undertake any further large acquisitions, at least until the BPSL acquisition has been integrated. The stable outlook also reflects our expectation that JSW will remain selective in its acquisitions, funding them with a prudent mix of debt and equity.
In addition, Moody's expects any such acquisitions to be immediately earnings accretive and help in rapid deleveraging, leading to at most only a temporary spike in leverage.
JSW Steel, a flagship company of the JSW Group, is an integrated steel manufacturer.
On a consolidated basis, the steel major's net profit jumped nearly 13 times to Rs 2681 crore in Q3 FY21 over Q3 FY20. Revenue from operations grew by 21% YoY to Rs 21,859 crore during the quarter.
Shares of JSW Steel were currently up 0.44% at 469.60 apiece, while the benchmark Sensex was down 0.99% to 49,638.53.
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