"While this has no immediate impact on the Ba3 rating of Tata Steel and B3 rating of Tata Steel UK Holdings, both with negative outlooks, it bodes well, given that the current March quarter is normally a strong quarter for the company," Moody's Investors Service said today in a release.
For the third quarter of the current financial year, Tata Steel's revenue increased 14 per cent year-on-year, while group deliveries grew 9.6 per cent.
"The base effect of the Jamshedpur expansion is now built-in to Tata Steel's performance and results will not improve significantly until the first phase of the Odisha expansion starts up in early 2015," said Alan Greene, a Moody's Vice President and Senior Credit Officer.
Tata Steel UK's cumulative deliveries for the first six months of the year were unchanged, but in the third quarter, deliveries grew by 5.6 per cent over the corresponding period last year.
Cost-saving measures, combined with higher realisations from the sale of more specialised steels in the product mix, have compensated for general price weakness, it said.
"While the European economy is not vibrant, if Tata Steel UK can maintain positive EBITDA (earnings before interest, taxes, depreciation, and amortisation) and move to net profits, then the chances of it meeting its impending leverage covenants or alternatively being in a position to be refinanced are much improved," Greene said.
Tata Steel's Southeast Asian operations have sustained their robust growth and output from the electric arc furnace in Singapore has been successfully increased.
"Gross debt at the group level is down to Rs 76,500 crore from Rs 77,100 crore at the end of September 2013 but up from the 31 March 2013 figure of Rs 66,100 crore," it said.