Tata Steel Limited witnessed a notable uptick of over 2 percent, trading at Rs 130 in the early morning session on September 26. The surge came in response to Moody’s Investors Service’s recent revision of the company’s outlook to ‘stable’ and an upgrade in its long-term rating, driven by optimistic projections of improved profitability and ongoing efforts in debt reduction.
According to a statement by the rating agency on September 25, Tata Steel’s long-term rating was upgraded from ‘Ba1’ to ‘Baa3’. The agency stated, “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.”
Moody’s anticipates an increase in Tata Steel’s profitability, even amid the challenges of softer steel prices impacting revenues. Kaustubh Chaubal, Moody’s Senior Vice-President, expressed this sentiment in a press release.
Furthermore, Moody’s acknowledged that Tata Steel’s upgraded rating is a result of its significant, globally competitive, vertically integrated steel operations in India. The rating agency also highlighted the consistent growth of Tata Steel’s European operations and the strategic closure of unprofitable upstream operations in the UK as contributing factors. Additionally, the company’s strong ties with its parent organization, Tata Sons, played a role in the enhanced rating.
This latest development follows Moody’s revision in June, when the rating agency changed Tata Steel’s outlook from ‘stable’ to ‘positive,’ while reaffirming its Ba1 corporate family rating (CFR).
Moody’s emphasized in its rationale that Tata Steel’s substantial presence in India, the world’s second-largest steel market, will continue to be a key driver of the company’s credit profile.
In conclusion, Moody’s rating upgrade underscores Tata Steel’s resilience in maintaining its operations amidst the challenges presented by the steel industry’s dynamic landscape.