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Fitch Ratings has revised the outlook on Tata Steel to Negative, from Stable and affirmed the Issuer Default Rating at ‘BBB-’.
The negative outlook reflects uncertainty on the UK operations with the change in the UK government and labour union’s actions to save job losses. This may delay the company’s plan to reduce losses through FY25.
Fitch expects robust growth in Indian operations and likely EBITDA profits at Dutch operations in FY25, may offset any losses at UK operations.
The rating agency forecasts the company’s EBITDA to rise by about 50 per cent this fiscal to about ₹31,100 crore, driven by volume growth in India and higher profitability at the Netherlands operations.
On standalone basis, EBITDA margin to improve to about $178 per tonne in FY25 against $176 last fiscal, on a better demand-supply balance.
Delays in plan to replace blast furnace with electric arc furnace may lead to higher-than-expected EBITDA losses in the UK operations.
Tata Steel’s debt is set to rise on negative free cash flow, based on the group’s investments in capex for capacity expansion in India and business-restructuring costs in the UK over the next two years.
“We forecast capex to be largely flat at ₹18,200 crore this fiscal before rising to ₹20,000 crore in FY26. Restructuring-related costs in the UK seen at ₹3,500 crore,” it said.
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