Moody’s Investors Service upgraded Tata Steel Ltd.’s long-term rating with a stable outlook on expectation of an improvement in profits and its debt reduction efforts.
The firm’s long-term rating was upgraded to Baa3 from Ba1, the ratings agency said Monday. “The upgrade reflects our expectation of the continued strength in Tata Steel’s credit profile due to the company’s solid market position in India,” it said.
India’s steel demand is expected to climb 7% a year until 2030 on the back of large infrastructure investments and consumption from the auto sector, according to Moody’s. That will be a key driver of Tata Steel’s credit profile, it added.
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Additionally, an improvement at its European operations and the company’s close association with parent Tata Sons Ltd. are also important reasons for the revision, Moody’s said.
Earlier this month, Tata Steel agreed to work with the UK government to help the Mumbai-based steelmaker overhaul Britain’s biggest steelworks and keep it running. The move is expected to help Tata trim costs and reduce earnings volatility.
“The likely improvement in its UK cost structure and the relatively better performing Dutch operations will ensure, in Moody’s view, Tata Steel’s credit profile remaining solid, even as steel prices remain soft and global steel demand weakens,” the company said.
Tata Steel’s strengthening credit metrics can be sustained even as the firm invests in building new capacity in India and Europe, the ratings agency added.