Tata Steel share price today
The upgrade to investment grade also reflects Tata Steel’s resilient operations in a challenging industrial environment.
Shares of Tata Steel rose 2.24 percent, or Rs 2.85, to Rs 130.20 on Tuesday morning after brokerage firm Moody’s gave the company a Baa3 long-term issuer rating and changed its outlook from positive to stable.
The steelmaker’s long-term rating was upgraded from ‘Ba1’ to ‘Baa3’, the rating agency said in a statement on September 25. “The upgrade reflects our expectation of the continued strength of Tata Steel’s credit profile due to the company’s solid market position. in India.”
“We expect the company’s profitability to increase even as softer steel prices hit earnings,” Kaustubh Chaubal, senior vice president of Moody’s, said in a news release.
Moody’s also said its rating reflects the company’s large-scale, globally cost-competitive, vertically integrated steel operations in India.
The rating agency also noted that the new rating is attributed to the consistent growth of Tata Steel’s European operations, along with the closure of unprofitable upstream operations in the United Kingdom. Moreover, it is influenced by the company’s strong bond with its parent organization, Tata Sons.
The upgrade to investment grade also reflects Tata Steel’s resilient operations in a challenging industrial environment.
During FY23, Tata Steel’s EBITDA halved to Rs 31,700 crore and cash flow from operations fell by almost 60 per cent to Rs 16,300 crore
Yet, the company’s gross debt rose by just 10 per cent, post its Rs 12,000 crore ($1.4 billion) acquisition of Neelachal Ispat Nigam Ltd (NINL), which closed in July 2022.
Tata Steel’s Indian operations continue to dominate consolidated earnings. While two-thirds of the company’s 28.8 million tonnes (mt) of global steel deliveries in FY23 were in India, Tata Steel India was responsible for over 80 percent of the company’s consolidated EBITDA.
“Meanwhile, Tata Steel’s (TSE) European operations lack backward integration and have historically generated volatile earnings, which negatively impacts the company’s credit profile,” Moody’s said.
The likely improvement in the UK cost structure and the relatively better performing Dutch operations will ensure a solid credit profile for Tata Steel, according to Moody’s, even as steel prices remain weak and global steel demand weakens due to rising interest rates and weak economic prospects in most countries. end-user markets.
“Even if substantial capital expenditure continues, Tata Steel will still generate strong free cash flow, enabling debt reduction with a consolidated debt-to-EBITDA leverage ratio comfortably below 2-2.5x over the next two financial years,” it said rating agency.
Tata Steel’s stock performance on Tuesday is in stark contrast to its performance in the last five trading sessions, when it fell 1.06 percent. However, the stock has risen 10.71 percent in the past month and 27.27 percent in the past six months. The stock is up 9.18 percent this year, while it is up 30.40 percent over the past year.
The benchmark Nifty 50 has fallen 1.69 percent in the past five sessions, while it has risen 2.01 percent in the past month. The benchmark index has risen 15.94 percent in the past six months, while the increase since the beginning of the year was 8.22 percent. The index has risen by 15.74 percent in the past year.
