Moody's Investors Service has on 15 April 2020 placed under review for downgrade Tata Steel's Ba2 corporate family rating (CFR).
Moody's Investors Service has on 15 April 2020 placed under review for downgrade Tata Steel's Ba2 corporate family rating (CFR). At the same time, Moody's has downgraded Tata Steel's wholly-owned subsidiary, Tata Steel UK Holdings' (TSUKH) CFR to B3 from B2 and placed the CFR underreview for further downgrade. The outlooks have been revised to ratings under review from stable. Moody's expects to conclude the review within 90 days.Moody's said given the current market situation, an upgrade of the CFRs of Tata Steel or TSUKH is unlikely in the nearterm. However, the outlooks could return to stable if improved market conditions lead to a recovery in metrics to pre-outbreak levels.Moody's could downgrade Tata Steel's CFR if leverage remains in excess of 4.5x or EBIT/interest coveragefails to improve to at least 2.0x, both on a sustained basis.Moody's could downgrade TSUKH's B3 CFR if the company continues to generate an EBITDA loss. Moreover,even with improvements in earnings, a failure to bring leverage back to around 7.0x will strain the B3 CFR. Also, any revision in Moody's assumption of support from Tata Steel will prompt a revision in the two-notch uplift incorporated in TSUKH's rating.
On 14 April 2020, S&P Global Ratings lowered its long-term foreign currency issuer credit rating on Tata Steel and subsidiary ABJA Investment Co., and the issue rating onvarious U.S.-dollar denominated senior unsecured notes ABJA has issued, to 'B+' from 'BB-'. The negative outlook reflects risks of further weakening in Tata Steel's credit profile if the effectof economic conditions and lower commodity prices are more prolonged than current expectations. This is particularly likely to arise if weak market conditions persist for longer in Europe, especially from the auto sector. The Indian operations could also see a sharper drop in profitability compared to base case.
On a consolidated basis, Tata Steel reported a net loss of Rs 1,130.65 crore in Q3 December 2019 as compared to a net profit of Rs 2,268.58 crore in Q3 December 2018. Net sales fell 8.7% to Rs 34,774.29 crore in Q3 December 2019 over Q3 December 2018.
Tata Steel Group is among the top global steel companies with an annual crude steel capacity of 33 million tonnes per annum (MnTPA). It is one of the world's most geographically-diversified steel producers, with operations and commercial presence across the world.
Shares of Tata Steel were up 0.75% at Rs 287.30. It hovered in the range of Rs 289.95 and Rs 276.20 do far.
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