Tata Steel Share Price Surges Over 2% Following Moody’s Upgrade

Tata Steel Share Price Surges Over 2% Following Moody's Upgrade

VoM News Desk | September 26, 2023 | 10:59 AM IST | Breaking News | Follow on Google News

Tata Steel Share Price Surges Over 2% Following Moody’s Upgrade

Tata Steel’s share price witnessed a robust start to trading on Tuesday, registering a gain of over 2% on the Bombay Stock Exchange (BSE). The stock opened at ₹129.70, compared to its previous closing price of ₹127.35, and surged to ₹130.05 in the early trading session.

Moody’s Upgrade Boosts Confidence

The positive momentum in Tata Steel’s share price was driven by an upgrade from Moody’s Investors Service, a prominent global rating agency. On September 25, Moody’s upgraded Tata Steel’s corporate family rating from ‘Ba1’ to ‘Baa3’ and changed the outlook from ‘positive’ to ‘stable.’ This upgrade signifies increased confidence in Tata Steel’s credit profile.

Factors Underpinning the Upgrade

The rationale behind the upgrade lies in Moody’s expectation of continued strength in Tata Steel’s credit profile. The company’s solid market position in India, coupled with anticipated improvements in profitability despite softer steel prices affecting revenues, influenced Moody’s decision. The rating agency also highlighted Tata Steel’s commitment to deleveraging through gross debt reduction and its expectation of maintaining conservative financial policies and well-balanced capital allocation.

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Key Drivers of Tata Steel’s Credit Profile

Moody’s emphasized several factors that underpin Tata Steel’s Baa3 issuer rating. These factors include the company’s large-scale, globally cost-competitive, vertically integrated steel operations in India, the anticipated improvement in its European operations following the closure of loss-making upstream operations in the United Kingdom, and Tata Steel’s close association with its parent company, Tata Sons Ltd.

The rating also takes into account Tata Steel’s exposure to the inherent volatility in steel prices and spreads, as well as the historical volatility of its European operations.

Strong Presence in India and Growth Prospects

Moody’s identified Tata Steel’s robust presence in India, the world’s second-largest steel market, as a key driver of the company’s credit profile. The rating agency anticipates a cumulative annual growth rate of 7% in steel consumption in India until 2030, driven by substantial infrastructure investments and increasing demand from the automotive sector.

Resilient Operations Amid Challenges

Despite a challenging industry environment, Tata Steel has demonstrated resilient operations. Moody’s pointed out that during fiscal 2023, Tata Steel’s EBITDA decreased significantly, but the company’s gross debt levels increased by only 10%, largely due to its acquisition of Neelachal Ispat Nigam Limited. This acquisition led to a gross debt-to-EBITDA ratio of 2.8 times in fiscal 2023.

Market Performance and Outlook

Tata Steel’s share price has exhibited strength in the current calendar year, gaining approximately 13%. This outperforms the broader equity benchmark, the Sensex, which has risen by about 9% during the same period.

Financial Snapshot

Tata Steel reported a 92% year-on-year decline in its consolidated net profit for Q1FY24, totaling ₹633.95 crore. The company’s consolidated total revenue from operations decreased by 6.21% to ₹59,489.66 crore during the same quarter.

Moody’s Upgrade Signifies Confidence

Moody’s upgrade of Tata Steel’s credit rating to investment grade reflects confidence in the company’s financial stability, market position, and strategic direction. It also suggests an optimistic outlook for Tata Steel within the global steel industry.

VoM News Desk

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