Fitch Revises Outlook on JSW Steel to Positive from Negative; Affirms at 'BB-'

Fitch Ratings has revised the Outlook on India's JSW Steel Limited's (JSWS) Issuer Default Rating (IDR) to Positive, from Negative, while affirming the IDR at 'BB-'. The agency has also affirmed the rating on the outstanding bonds of JSWS and its subsidiary Periama Holdings, LLC, which are guaranteed by JSWS, at 'BB-' and assigned a Recovery Rating of 'RR4'.

The Outlook revision is based on our estimate that JSWS's leverage in the financial year ended March 2021 (FY21), excluding the impact of the Bhushan Power and Steel Ltd (BPSL) acquisition, was materially lower yoy and compared with our previous expectations. We also expect leverage to continue to decrease.

We expect JSWS's EBITDA to rise further from FY22, driven by higher volumes after adding capacity of 5 million tonnes per annum (mtpa), or more than a quarter of current capacity, from mid-FY22. We expect limited impact on JSWS's steel output despite a resurgence in Covid-19 cases in India and see upside risk to our FY22 margin assumption, if robust steel prices are sustained.

Capex is also likely to increase after a cut in FY21 as the company re-focuses on growth. Although we have assumed higher capex from FY22, a further increase in JSWS's spending plans remains a risk as our expectation for leverage implies that it will stay well within company's net debt to EBITDA ratio target of 3.75x.

Shares of JSW STEEL LTD. was last trading in BSE at Rs.705.75 as compared to the previous close of Rs. 717.2. The total number of shares traded during the day was 223389 in over 4106 trades.

The stock hit an intraday high of Rs. 720.35 and intraday low of 704.05. The net turnover during the day was Rs. 158762164.

Source : Equity Bulls

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