Crisil Upgrades Sail Paper Rating

The rating assigned to Rs 2,730 crore worth of bonds of Steel Authority of India (SAIL) has been upgraded by Credit Rating and Information Services Ltd (Crisil) from BB to BBB. The agency has also upgraded the fixed deposit issue of the steel behemoth from FB+ to FA-.

The move follows the over Rs 8,500-crore restructuring package approved by the Government of India on Tuesday.

In a statement, Crisil said that the upgrade was based upon a positive view of the package, the strong signals emerging out of support to repayment of SAIL's debt obligations through government guaranteed bonds and various other initiatives taken to improve the company's long term viability.

 

However, Crisil still has concerns on the continued pressure on SAIL's profitability and relatively weak capital structure. The timing of the asset sale is also crucial to the cash flows of the company, said Crisil.

Crisil said the package indicates the Centre's willingness to support SAIL in meeting its debt obligations. The government-guaranteed bonds scheme to raise funds for a VRS also indicates the government's initiative in improving the long term viability of the company.

CRISIL still has concerns about the continued pressure on SAIL's profitability on account of interest expense from the largely debt funded capital expenditure programmes and the still relatively weak capital structure for a company in a highly competitive commodity steel business.

While the explicit support by the government of India in the form of guaranteed loans to meet SAIL's debt redemption requirement is a favourable development.

Crisil expects that such support will continue till SAIL's financial position and cash flows improve from current levels.