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Tata Steel share rises 2% on credit rating upgrade

Tata Steel share rises 2% on credit rating upgrade

CARE Ratings said that there have been numerous price hikes from Q2-FY21 onwards leading to improvement in sales realization per tonne which resulted in improvement in EBITDA per tonne.

Tata Steel share rises 2% on credit rating upgrade Tata Steel share rises 2% on credit rating upgrade

Share of Tata Steel Limited (TSL) rose 2.4 per cent to hit an intraday high of Rs 1,218.45 on BSE after rating agency CARE Ratings upgraded the long-term credit rating of the company to 'CARE AA+' with a stable outlook from 'CARE AA' with a negative outlook.
 
"The revision in rating and outlook assigned to the instruments of Tata Steel Limited (TSL) factors in the improvement in performance witnessed during FY21, sequentially from Q2-FY21 onwards, particularly in Indian operations, on the back of revival in demand and increased steel prices leading to substantial cash flow generation and sizeable deleveraging at the end of FY21 resulting in improvement in debt coverage indicators," the rating agency said.
 
The stock has gained 251 per cent in the last one year and risen 88 per cent since the beginning of this year. It opened 0.19 per cent higher at Rs 1,192.00 against the previous close of Rs 1,189.75 on BSE.
 
With a market cap of Rs 1,45,402 crore, the share of the steel major stands higher than 5 day, 10 day and 20 day, 50 day 100 day, 200 day moving averages.
 
"TSL’s European operations also, although had reported operating losses for whole of FY21, have witnessed improvement in profitability during Q4-FY21, largely on the back of significantly higher steel prices along with lower coking coal prices, which has more than offset the sharp increase in iron-ore prices," CARE noted.
 
"Given the current price trend in Europe, the European operations are envisaged to report operating profit in near future as well. However, risk emanating from the downside risk in case of adverse movement in steel and raw material prices for the European operations continues to remain. The rating continues to factor in the established track record of TSL as one of India’s largest integrated steel manufacturing companies with enriching product-mix having significant captive raw material security and global presence aided by geographically diversified production facilities," it added.
 
CARE Ratings said that there have been numerous price hikes from Q2-FY21 onwards leading to improvement in sales realization per tonne which resulted in improvement in EBITDA per tonne. The higher steel prices resulted in improvement in realizations across geographies and improved operating EBITDA per tonne mainly during the second half of FY21.
 
It further added that the Indian operations continued to showcase healthy performance on the back of an increase in steel prices, lower coking coal prices, and insulation from an increase in iron-ore prices due to captive mines. The European operations continued to report operating losses for the second consecutive year, although it has posted an operating profit during Q4-FY21.
 
In quarterly terms, Tata Steel reported a standalone net profit of Rs 6,593.54 crore in Q4 FY21 as opposed to a loss of Rs 436.83 crore in Q4 FY20. The company recorded its highest-ever quarterly crude steel production at 4.75 million tonnes during the quarter, while steel deliveries grew to 4.67 million tonnes.
 

 

Published on: Jul 09, 2021, 11:30 AM IST
Posted by: Tanya Aneja, Jul 09, 2021, 11:27 AM IST