+
Economic recovery: Moody’s upgrades Tata Steel outlook to stable
ECONOMY & POLICY

Economic recovery: Moody’s upgrades Tata Steel outlook to stable

A strong recovery in Tata Steel's operations in the third quarter (Q3) of the fiscal year ending March 2021 has changed the outlook of global rating agency Moody's Investors Service on the steel major from negative to stable.

The global rating agency affirmed the company's Ba2 corporate family rating (CFR). According to the agency, Tata Steel will sustain the improvement over 12-18 months, enabling its consolidated financial metrics to recover to levels more appropriate for its Ba2 CFR.

India's (Baa3 negative) steel consumption declined by 55% during the first quarter of fiscal 2021 (Q1 FY21) after a nationwide lockdown to contain Covid-19. After the economy opened in June 2020, pent-up demand from end-user industries like automotive, white goods manufacturing, construction and infrastructure have boosted steel consumption.

This has contained the annual steel consumption declined to only about 11%. Moody's estimates shipments for Tata Steel Indian operations (TSI) during fiscal 2021 will stay largely flat. A benign industry environment, supportive government policies in the form of large infrastructure investments and markedly better prospects in the automotive industry have supported steel prices in India.

These conditions have propelled TSI's record profitability in recent quarters. TSI's profitability has steadily improved to its 10-year high of Rs 18,948 EBITDA per ton during Q3, from Rs 4,969 in Q1 fiscal 2021.

Moody's forecasts a long-term sustainable EBITDA per ton of Rs 13,200 for fiscal year 2022 for TSI, constituting a 30% gap compared with Q3. The company, therefore, has a substantial buffer especially given the benign operating environment. Moreover, the company's backward linkages with entire iron ore needs met from captive sources provide resilience to profitability even if steel prices were to fall severely.

In contrast, Moody's estimates shipments at Tata Steel's European operations (TSE) will decline by about 10% during FY21 and for profitability to gradually recover.

Europe's economic activity was affected by further lockdowns and a seasonally weak winter quarter, although it has improved since the pandemic's early months.

Image Source


Also read: Tata Steel Q3 operating profits highest ever

A strong recovery in Tata Steel's operations in the third quarter (Q3) of the fiscal year ending March 2021 has changed the outlook of global rating agency Moody's Investors Service on the steel major from negative to stable. The global rating agency affirmed the company's Ba2 corporate family rating (CFR). According to the agency, Tata Steel will sustain the improvement over 12-18 months, enabling its consolidated financial metrics to recover to levels more appropriate for its Ba2 CFR. India's (Baa3 negative) steel consumption declined by 55% during the first quarter of fiscal 2021 (Q1 FY21) after a nationwide lockdown to contain Covid-19. After the economy opened in June 2020, pent-up demand from end-user industries like automotive, white goods manufacturing, construction and infrastructure have boosted steel consumption. This has contained the annual steel consumption declined to only about 11%. Moody's estimates shipments for Tata Steel Indian operations (TSI) during fiscal 2021 will stay largely flat. A benign industry environment, supportive government policies in the form of large infrastructure investments and markedly better prospects in the automotive industry have supported steel prices in India. These conditions have propelled TSI's record profitability in recent quarters. TSI's profitability has steadily improved to its 10-year high of Rs 18,948 EBITDA per ton during Q3, from Rs 4,969 in Q1 fiscal 2021. Moody's forecasts a long-term sustainable EBITDA per ton of Rs 13,200 for fiscal year 2022 for TSI, constituting a 30% gap compared with Q3. The company, therefore, has a substantial buffer especially given the benign operating environment. Moreover, the company's backward linkages with entire iron ore needs met from captive sources provide resilience to profitability even if steel prices were to fall severely. In contrast, Moody's estimates shipments at Tata Steel's European operations (TSE) will decline by about 10% during FY21 and for profitability to gradually recover. Europe's economic activity was affected by further lockdowns and a seasonally weak winter quarter, although it has improved since the pandemic's early months. Image Source Also read: Tata Steel Q3 operating profits highest ever

Next Story
Real Estate

Shriram Properties Launches ‘Codename: The One’ in Bengaluru

Shriram Properties (SPL), a leading real estate developer focused on the mid-market and mid-premium segments, has announced the launch of its latest residential project under the banner “Codename: The One” in Bengaluru’s Electronic City corridor. This feature-rich gated community will offer 340 spacious 2- and 3-BHK residences, with a total saleable area of approximately 5 lakh square feet and an estimated revenue potential of over Rs 3.5 billion. The project is expected to be developed over a span of more than three years.  Strategically located near the Bommasandra Metro stat..

Next Story
Resources

India Warehousing Show 2025 Closes with Strong Global Presence

The 14th edition of the India Warehousing Show (IWS) 2025 concluded successfully at Yashobhoomi (IICC), Dwarka, drawing participation from over 300 exhibitors across 15 countries and welcoming 15,000+ visitors. Recognised as India’s leading platform for warehousing and logistics excellence, IWS 2025 offered a comprehensive display of cutting-edge automation, sustainable warehousing solutions, and next-gen supply chain technologies. The show was inaugurated by Shri Pankaj Kumar, Joint Secretary – Logistics, DPIIT, Ministry of Commerce and Industry, Government of India. In his opening a..

Next Story
Equipment

MHIET Launches 450kW Gas Cogeneration System with H₂ Co-Firing

Mitsubishi Heavy Industries Engine & Turbocharger (MHIET), part of the Mitsubishi Heavy Industries Group, has launched a new 450kW gas cogeneration system, the SGP M450, jointly developed with Toho Gas Co.,. The system supports hydrogen co-firing at up to 15 vol per cent, with no loss in performance or reliability.  The system is currently available in the Japanese market, and has been developed from the existing GS6R2 city gas engine platform. Key modifications were made to the fuel gas and engine control systems to enable hydrogen co-firing.   Verified through de..

Advertisement

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Advertisement

Talk to us?