Healthy steel prices, fund from rights issue to strengthen Tata Steel's book: Fitch Ratings
The agency kept its rating 'Rating Watch Evolving' as it awaits details on the joint venture with Thyssenkrupp AG, Germany
Tata Steel's improved financial performance along with equity inflow from the ongoing rights issue will help strengthen the company's financials, says a Fitch Ratings report.
The agency kept its rating 'Rating Watch Evolving' as it awaits details on the joint venture with Thyssenkrupp AG, Germany.
Tata Steel is, however, holding a Rs 128 billion rights issue of ordinary shares from February 14-28, 2018.
The report said Tata Steel's consolidated EBITDA jumped 54% year-on-year in the first nine months of 2017-18, with Indian operations accounting for more than 60% of the incremental EBITDA.
"TSL's improved EBITDA so far in 2017-18 and equity inflow from a planned rights issue should enable the company to deleverage and strengthen its balance sheet even as it aims to expand capacity in India," the report said.
Supported by steady domestic demand growth, steel prices in India have moved in tandem with the increase in global prices over April-December.
Hot rolled steel sheet spot prices in China have increased to $650/tonne, from around $450/tonne in April 2017, driven by the improved balance in demand and supply in the world's largest market and an increase in raw material costs, the report said.
In India, the company benefited from 18% growth in steel sales in April-December.
Elevated steel prices and volume increase helped EBITDA per tonne growth to nearly Rs 14,100 per tonne in third quarter from Rs 10,600 per tonne in the first quarter in India.