Kolkata: Fitch Ratings has affirmed Tata Steel (TSL) long-term issuer default rating (IDR) at 'BB' with 's table' outlook.
Tata Steel UK Holdingslongterm IDR has also been affirmed at 'B' with stable outlook.
The agency said all ratings have been removed from Rating Watch Evolving (RWE), on which they were placed on April 1, 2016.
While BB underlines sensitivity to changes in the economy, B denotes noticeable changes in financial situation.The affirmation of TSL's ratings follows the European Commissions rejection of a proposed 50:50 joint venture with Thyssenkrupp AG on antitrust concerns.
The venture was tipped to reduce TSLs exposure to high costs and weak demand growth in Europe.
However, we have not assumed any cut in exposure to Europe for our assessment of TSL's overall business and financial profile in the absence of further clarity, Fitch said.TSL's ratings, according to Fitch, were underpinned by its high profitability in India, and its market position as the largest domestic steelmaker by sales volume.
A moderation in domestic steel prices in tune with decline in global prices since October 2018 and rising risks to global steel demand in wake of trade disputes, could rein in prices and margins in FY20, though TSL will retain advantage of captive raw materials base.Acquisitions, a key rating factor, have also strengthened TSLs focus on India, which now contributes to 60 per cent of capacity from 50 per cent in FY18 through acquisitions like Tata Steel BSLin April 2018 and Usha Martin in April 2019.
Another driver was a pick-up in TSL's capex in FY19 after a slide in FY15-FY18, with the start of a Rs 23,500 crore project to raise capacity at Kalinganagar by 5 MT per annum, including a 2.2 mtpa cold-rolling mill to produce high-end steel for automobiles.