Fitch downgrades outlook on SAIL to negative from stable

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Mumbai | Published: April 9, 2015 3:58:02 AM

Fitch Ratings has revised the outlook on Steel Authority of India's (SAIL) long-term foreign-currency issuer default rating (IDR)...

Fitch Ratings has revised the outlook on Steel Authority of India’s (SAIL) long-term foreign-currency issuer default rating (IDR) to negative from stable, according to a release, which added that the IDR is affirmed at ‘BBB-‘.

“The outlook revision reflects SAIL’s higher leverage and subdued operating performance following weak economic growth in India,” the release said. It further indicated that delays in execution of debt-funded expansion and modernisation programme, low profitability and muted demand have led to deterioration in the company’s credit profile.

The company’s net leverage increased to 5.5x during FY14 (FY13: 3.85x) while the Ebitda interest cover fell to 4.3x (FY13: 6.2x) due to muted steel demand that weakened profitability and rising net debt from its capex, the release said.

SAIL is the largest manufacturer of steel in India with crude steel production of 13.5 mt in FY14, according to the release, which added that the company is in the process of expanding its capacity to 21.4 mt by FY16. SAIL has limited coking coal linkages and imports more than 75% of its requirements, it said.

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