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Tata Steel's outlook remains negative: Fitch

Last Updated: Tuesday, April 16, 2013 - 23:57

New Delhi: Citing pressure on Tata Steel's profitability in its Indian as well as European operations, credit rating agency Fitch on Tuesday said outlook for the company remains negative.

The company's performance was weak in the first 9 months of last fiscal, with EBITDA (earnings before interest, taxes, depreciation and amortisation) margin falling to 8 percent reflecting the challenging economic conditions, Fitch said.

It added that profitability at Tata Steel's Indian operations fell to 28.5 percent in the 9 months, while Tata Steel Europe recorded EBITDA losses during two quarters.

"The negative outlook continues to reflect Fitch's expectations of likely pressure on TSL's profitability at its Indian and European operations," the rating agency said.

It also said that Tata Steel's volumes at its expanded Indian operations grew to 7.5 million tonne per annum (mtpa) during FY13 and was driven commissioning of additional 2.9 mtpa of capacity which came on line during second quarter of the last fiscal.

"Fitch expects the stable growth in volumes to result in EBITDA growth over the medium term, with a larger proportion of additional volume likely to be in value added products. However, any significant fall in steel prices may impact the company's financial profile negatively," it said.

Fitch also noted that the leading steel firm is planning to reduce its debt levels in the current fiscal and said that Fitch believes that Tata Steel may divest additional assets to prune its debt.

However, any non-reduction in debt levels may impact the ratings negatively, Fitch said, while affirming the long-term foreign currency issuer default rating of the company at BB+.

Tata Steel's European operations' long-term foreign currency issuer default rating has been affirmed B+ rating.

Fitch's BB+ rating means speculative grade and indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time. Similarly, the B+ rating means highly speculative and indicate that material default risk is present, but a limited margin of safety remains.


First Published: Tuesday, April 16, 2013 - 23:57
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