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Informist, Wednesday, Dec. 24, 2025

 

--S&P affirms 'BBB' issuer credit rating on Tata Steel; outlook stable

--S&P: Expect Tata Steel's credit metrics to recover over next 12-18 months 

 

KOLKATA – Tata Steel Ltd. Wednesday said credit rating agency S&P Global Ratings has affirmed its issuer credit rating on the company at 'BBB' with a stable outlook. The rating affirmation reflects S&P's view that higher volumes and cost-reduction initiatives can balance the effects of recently announced growth projects on Tata Steel's leverage metrics, the company said in a filing with the bourses. 

 

In its ratings rationale, S&P Global said Tata Steel's recently announced growth projects will further delay deleveraging and result in credit metrics that will remain weaker than its previous expectations. However, higher volumes and cost-reduction initiatives will likely bolster the India-based steelmaker's earnings. S&P Global expects Tata Steel to fund its capital expenditure largely through operating cash flow.

 

"The stable outlook reflects our expectation that the company's credit metrics will recover over the next 12-18 months, backed by higher output in India and lower losses in the UK," S&P Global said in the ratings rationale statement. Tata Steel's planned 4.8 million tonne per annum expansion at its subsidiary unit, Neelachal Ispat Nigam Ltd. and the addition of downstream capacity will likely increase annual capital expenditure by INR 100 billion-INR 200 billion over the next few years. In our view, this high level of spending will result in negative discretionary cash flow and delay deleveraging, according to S&P Global. 

 

"Consequently, we expect Tata Steel's adjusted debt to increase to INR 1,100 billion in fiscal 2028 (2027-28 (Apr-Mar)) - about INR 350 billion higher than our previous forecast," the rating agency said.

 

At the same time, domestic hot rolled coil prices have corrected by more than 10% from highs of INR 52,500 per tonne in May because of tepid demand and a supply glut, S&P Global said adding that significant capacity additions by domestic peers over the past few quarters have created a temporary surplus. This coincided with an extended monsoon, which has slowed construction activity.

 

"The demand-supply imbalance will likely persist for a few months until construction activity gains momentum. As a result, we have lowered our fiscal 2026 EBITDA estimate for Tata Steel by 10%-15%. We now forecast the company's ratio of funds from operations to debt to be 21%, down from our previous estimate of 26%," S&P Global said. 

 

A ramp-up at Tata Steel's Kalinganagar facility in Odisha would add about 2.5 million tonne to total output during FY27 and new downstream facilities, including a cold-rolling mill and annealing line will improve both product mix and EBITDA per tonne, S&P Global said.

 

"In addition to this, we anticipate INR 30 billion-INR 35 billion in savings through the curtailment of losses in the UK business and optimised iron ore pellet sourcing from a recently acquired entity," S&P Global said adding that these factors will translate into an incremental EBITDA per tonne of INR 1,000 at the consolidated level.

 

S&P Global said it now forecasts Tata Steel's EBITDA will increase 30% to INR 410 billion in FY27 compared with its estimate of INR 319 billion during FY26. 

 

For the quarter ended September, Tata Steel reported a consolidated net profit of INR 31.02 billion on consolidated revenue of INR 586.89 billion. Wednesday, its stock closed 0.5% lower at INR 170.07 on the National Stock Exchange.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Avishek Rakshit

Edited by Vandana Hingorani

 

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