The company’s long-term rating was upgraded to Baa3 from Ba1The rating agency reported this on Monday. “The upgrade reflects our expectation of continued strength Tata Steel’s credit profile is due to the company’s solid market position in India,” the report said.
According to Moody’s, India’s steel demand is expected to grow 7% per year through 2030 due to heavy investments in infrastructure and automotive sector consumption. That will be an important factor in Tata Steel’s credit profile, the company said.
In addition, an improvement in the European operations and the company’s close cooperation with parent company Tata Sons Ltd. also important reasons for the revision, according to Moody’s.
Earlier this month, Tata Steel agreed to work with the British government to help the Mumbai-based steelmaker overhaul and keep Britain’s largest steel mill running. This move is expected to help Tata cut costs and reduce earnings volatility.
“The likely improvement in the UK cost structure and the relatively better performing Dutch operations, according to Moody’s, will ensure that Tata Steel’s credit profile remains solid, even as steel prices remain soft and global steel demand weakens,” the company said.
Tata Steel’s strengthening credit metrics can be maintained even as the company invests in building new capacity in India and Europe, the rating agency said.