SAIL gets credit rating upgrade; stock reaction and what led to the upgrade

Steel Authority of India Ltd (SAIL) has received a credit rating upgrade from India Ratings and Research, with the agency raising its Long-Term Issuer Rating to ‘IND AA+’ with a Stable outlook from 'IND AA'. The ratings on its public deposits were also upgraded to ‘IND AA+/Stable’, while bank loan facilities were upgraded/affirmed at 'IND AA+/Stable/IND A1+'.

The SAIL stock was trading largely flat on Friday. It opened at Rs 198.90 against its previous close of Rs 196 and touched a high of Rs 198.90 and a low of Rs 194.30.

The upgrade reflects an improvement in SAIL's operational performance through FY26 and the first quarter of FY27, supported by higher sales volumes, lower production costs and better raw material management. India Ratings also cited improvements in blast furnace productivity, captive iron ore consumption and the company's coke rate.

Lower debt, better working capital

The rating agency said SAIL's consolidated net adjusted leverage improved following a reduction in net debt, helped by lower working capital requirements, better inventory management, recovery of receivables and repayment of long-term debt. Its net debt declined to Rs 35,700 crore in FY26 from Rs 41,400 crore in FY25, while net adjusted leverage fell to 2.97 times from 3.89 times.

India Ratings expects SAIL's leverage to remain below 3 times in FY27, supported by higher volumes, lower production costs, a greater share of value-added products and better working capital management. However, leverage could rise to 3.5-4 times during the peak capex phase in FY28-FY30.

Rs 1 lakh crore capex plan

A key monitorable for SAIL will be its planned capital expenditure and debottlenecking projects. The company plans to spend around Rs 1 lakh crore between FY27 and FY31, with the majority of the capex expected during FY28-FY31. The spending is aimed at increasing its capacity to 35 million tonnes by FY31-FY32.

The agency said 55-65 per cent of the planned capex is expected to be debt-funded, with the remainder coming from internal accruals. It also noted SAIL's past track record of spending less than announced capex and delays in project execution, making the pace of expansion and funding structure important rating monitorables.

Volumes, mines to support growth

SAIL's sales volumes rose to around 19.9 million tonnes in FY26, compared with 17.9 million tonnes in FY25. India Ratings expects revenue to improve in FY27, supported by volume growth from debottlenecking projects and strong domestic demand. The operationalisation of the Tasra mine from December 2027 and Rowghat mine from FY28 is also expected to improve raw material availability and support higher production.

EBITDA improvement

SAIL's Ebitda per tonne stood at Rs 6,030 in FY26, compared with Rs 5,948 in FY25, while its EBITDA margin improved to 10.8 per cent from 10.4 per cent. Absolute EBITDA increased 13 per cent to around Rs 12,000 crore in FY26.

In the first quarter of FY27, EBITDA per tonne improved to Rs 9,887, while EBITDA stood at around Rs 4,200 crore with a margin of 15.8 per cent. India Ratings expects EBITDA per tonne to remain around Rs 8,500 and overall EBITDA margins at 12-14 per cent through FY27-FY28, helped by higher value-added products, operating efficiencies and cost reduction measures.