New Delhi [India], May 10 : Fitch Ratings has affirmed Tata Steel Limited's (TSL) Issuer Default Rating (IDR) at 'BBB-' with a "negative" outlook, and the senior unsecured rating at 'BBB-', the rating agency said in a statement.
Concurrently, Fitch has withdrawn Tata Steel Limited's ratings. On Friday, Fitch said it has chosen to withdraw Tata Steel's ratings for "commercial reasons".
The "negative" outlook, according to the rating agency, reflects the risks of a sustained weakening in Tata Steel's financial profile from a persistent oversupplied steel industry market and a prolonged period of EBITDA volatility at the company's European operations from restructuring plans.
The rating agency projects a near-term EBITDA weakness in India, on account of pricing and margin pressure from higher volumes of low-cost imports, and in Europe from weak demand, high imports and delayed restructuring of the UK operations.
Fitch forecasts Tata Steel's standalone EBITDA margins to improve to around Rs 15,000 per tonne in 2025-26 (Fitch estimate 2024-25: Rs 13,500 per tonne).
The central government imposed 12 per cent safeguard duties on certain steel imports for 200 days in April.
"We expect these duties to aid pricing growth, but to a lesser extent than 12 per cent, given risks to consumption from a full pass-through, and of further weakness in import prices," Fitch said.
"Nonetheless, steady volume growth, moderation in iron ore and coking coal costs, and improving industry demand-supply will also support margin improvement."
On the tariffs imposed on India's steel imports by the US, Fitch said it will have a limited impact on India.
"We also believe that the 25% tariff imposed by the US on India's steel imports will have limited direct impact on Indian steelmakers, given their minimal exposure to US exports," Fitch argued.
Tata Steel Limited is among the largest steelmakers in India, with a capacity of around 22 million tonnes per annum and a flat-product-focused portfolio. It also has 7 million tonnes per annum of steelmaking capacity in the Netherlands, 5 million tonnes per annum in the UK and around 2 million tonnes per annum in Thailand.
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