Fitch affirms Tata Chemicals at BB-plus with stable outlook
Mar 27, 2021
Singapore, Mar 27 : Fitch Ratings has affirmed Tata Chemicals Ltd's (TCL's) long-term foreign currency issuer default rating at BB-plus with a stable outlook.
It said the rating reflects TCL's leading position as the world's third-largest soda ash producer, its cost-competitive operations and geographical diversification, a healthy financial profile despite pandemic-related disruptions, and the soda-ash sector's adequate exposure to non-discretionary end-markets.
But the rating is constrained by TCL's small scale relative to global peers and limited product diversification.
The stable outlook reflects Fitch expectations that TCL's credit metrics will remain adequate over the medium term.
However, downside risks could arise from higher-than-expected capex, shareholder payouts and acquisitions, or a prolonged weakness in industry conditions.
Fitch said TCL's liquidity is strong supported by a cash balance of Rs 3,100 crore as of end-2020 and undrawn credit lines and revolving credit facilities of Rs 960 crore. The company also had investments of Rs 1,900 crore (including unquoted ones, for instance a 2.5 per cent stake in Tata Sons Ltd) as of FY20.
This boosts its liquidity options. TCL has comfortably refinanced a 225 million dollar term loan and a 175 million dollar bridge loan at its North American business so far in FY21.
TCL has easy access to credit markets being part of the Tata group, and its financial flexibility remains strong. Fitch said it expects capex to be funded largely through free cash flow over FY21 to FY24.
