Fitch revises outlook on JSW Steel’s long-term IDR to ‘negative’

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Published: February 26, 2020 2:40:44 AM

Fitch Ratings on Tuesday revised the outlook on JSW Steel's long-term issuer default rating (IDR) to 'negative' from 'stable', and affirmed the IDR at 'BB'.

fitch, fitch ratingFitch said in a note that the revision of the outlook reflects the risks in JSW Steel’s ability to deleverage and generate positive free cash flow (FCF) because of the various challenges in the Indian market. “

Fitch Ratings on Tuesday revised the outlook on JSW Steel’s long-term issuer default rating (IDR) to ‘negative’ from ‘stable’, and affirmed the IDR at ‘BB’. At the same time, the agency also affirmed JSW Steel’s senior unsecured rating and the rating on its senior unsecured notes at ‘BB’.

Fitch said in a note that the revision of the outlook reflects the risks in JSW Steel’s ability to deleverage and generate positive free cash flow (FCF) because of the various challenges in the Indian market. “Apart from weak industry conditions, JSW Steel’s deleveraging and improvement in its FCF profile can be delayed by an increase in its planned capex or inability to stabilise and improve performance at acquired assets. A deleveraging trajectory that is slower than our expectations and prolonged negative FCF will indicate a weaker financial profile and affect JSW Steel’s ratings,” Fitch stated.

The rating agency pointed out that JSW Steel’s total gross debt/Ebitda leverage, including acceptances, a long-term customer advance and potential outflows for acquisition of assets under insolvency proceedings in India, will increase to above 5.0x in the financial year ending March 2020 (FY20), which is above the 4.0x threshold where it would consider negative rating action.

The steelmaker’s profits had plunged 88% to Rs 187 crore in the quarter ended December 2019, led by lower realisation. Crude steel production during the December quarter dropped 5% on year to 4.02 million tonne due to extended monsoon, which impacted the operations at Dolvi and Vijayanagar plants, the company had said.

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