JSW Steel ramps up capacity to 83% in May from 38% in April

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Published: June 3, 2020 3:15 AM

Fitch Ratings, too, downgraded the issuer default ratings of JSW Steel to BB- from BB, and outlook to negative. The agency has also downgraded the steel company’s senior unsecured rating to ‘BB-‘ from ‘BB’.

"In fact, there is a distinct possibility that JSW will remain in breach of our downgrade triggers for its Ba2 CFR,” he added.“In fact, there is a distinct possibility that JSW will remain in breach of our downgrade triggers for its Ba2 CFR,” he added.

JSW Steel ramped up its capacity utilisation to an average of 83% in May from 38% in April. The crude steel production stood at 12.48 lakh tonne in May, more than double the output in April.

However, on a year-on-year basis, production in May saw a moderate decline of 2%.

Ratings firm Moody’s Investors Service recently placed JSW Steel’s Ba2 corporate family rating (CFR) and the Ba2 senior unsecured rating under review for downgrade. The ratings outlook was revised from stable to “ratings under review”.

Kaustubh Chaubal, lead analyst at JSW, said, “The review for downgrade reflects our expectation that weak steel demand will strain JSW’s credit profile, at least through the fiscal year ending March 2021.” “In fact, there is a distinct possibility that JSW will remain in breach of our downgrade triggers for its Ba2 CFR,” he added.

Fitch Ratings, too, downgraded the issuer default ratings of JSW Steel to BB- from BB, and outlook to negative. The agency has also downgraded the steel company’s senior unsecured rating to ‘BB-‘ from ‘BB’.

The ratings firm said the portfolio review followed its expectation of a decline in steel demand in India for the year ending March 2021, compared to its earlier assumption of a mid-single-digit volume increase, due to the economic impact of the coronavirus pandemic. The Indian Steel Association has forecast an 8% drop in domestic demand in FY21, and Fitch said it assumed standalone sales volume for JSW Steel would decline by 6%.

However, the company maintained that it was on track to meet its guidance on production, sales and costs side for FY21. Moreover, the company has no plans to reduce debt this year as it is in the middle of expansion. Seshagiri Rao, joint managing director and group chief financial officer, JSW Steel, recently told FE, “We are a company which is in the midst of expansion and we have to complete those projects. We are working on not to increase the debt and we are aiming for maintaining it at the current levels. However, reduction may not be possible in this year.”

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