Fitch downgrades Tata Steel, JSW Steel to BB- from BB, outlook negative

Mumbai: Fitch Ratings said on Friday it has downgraded the issuer default ratings (IDR) of Tata Steel and JSW Steel to 'BB-' from 'BB', with negative outlook, on expectations of decline in steel demand in India.

The portfolio review follows the ratings agency’s expectation of a decline in steel demand in India for the year ending March 2021 compared with its earlier assumption of a mid-single-digit volume increase, due to the economic impact of the coronavirus pandemic.

Fitch has also downgraded Tata Steel UK Holdings Limited's (TSUKH) Long-Term IDR to 'B-' from 'B'. The agency has also downgraded JSW Steel and Tata Steel’s senior unsecured rating to 'BB-' from 'BB'.

It withdrew TSUKH's long-term IDR because TSUKH is no longer issuing debt and there is no Fitch-rated debt outstanding following refinancing by TSL for its European operations in January 2020

Fitch pointed at Indian Steel Association's forecast of an 8 per cent drop in domestic demand in FY21, and the ratings agency assumes standalone sales volume for Tata Steel and JSW Steel will decline by 6 per cent

“We also expect a lower EBITDA margin in FY21 due to the volume drop and weaker steel prices. We assume volume and margins will increase significantly in FY22 from a weak base, supported by a broader economic recovery,” Fitch said in a release.