Issuer default ratings of Tata Steel, JSW Steel downgraded by Fitch

New Delhi: The issuer default ratings (IDR) of two steel majors- Tata Steel and JSW Steel have been downgraded by Fitch Ratings to 'BB-' from 'BB' earlier.

The ratings downgrade has been done because of the twin problems of weaker steel demand and lower prices for the metal. Fitch has also downgraded JSW Steel Ltd’s and Tata Steel Ltd’s senior unsecured rating to 'BB-' from 'BB'. 

Fitch had earlier estimated that there will be a demand increase in single digit in India but now the ratings agency thinks there will be lower demand in the current calendar year.

"We assume standalone sales volume for JSW Steel and Tata Steel Ltd will decline by 6 percent…we assume volume and margins will increase significantly in FY22 from a weak base, supported by a broader economic recovery," Fitch said in a statement.

The ratings agency also downgraded Tata Steel UK Holdings Ltd's (TSUKH) long-term issuer default ratings to 'B-' from 'B' with negative outlook. 

Fitch Ratings said that it is withdrawing TSUKH's long term issuer default ratings because the steel maker is no longer issuing debt and there is no Fitch-rated debt outstanding following refinancing by Tata Steel Ltd for its operations in Europe earlier this year. 

Fitch said that its downgrade of JSW Steel is because of its estimated that the steel maker’s gross debt/EBITDA leverage, including acceptances and a long-term customer advance, will be beyond its previous negative rating action threshold of four times over the coming 3 years.