Fitch revises outlook on JSW Steel to positive, affirms at BB-minus

Singapore, May 20 : Fitch Ratings has revised the outlook on JSW Steel (JSWS) issuer default rating to positive from negative while affirming the IDR at BB-minus.
The agency has also affirmed rating on outstanding bonds of JSWS and its subsidiary Periama Holdings LLC which are guaranteed by JSWS at BB-minus and assigned a recovery rating of RR4.
The outlook revision is based on an estimate that JSWS's leverage in the financial year ended March 2021 (FY21), excluding the impact of the Bhushan Power and Steel Ltd (BPSL) acquisition, was materially lower year-on-year and compared with previous expectations.
"We also expect leverage to continue to decrease," said Fitch. "We expect JSWS's EBITDA to rise further from FY22 driven by higher volumes after adding capacity of 5 million tonnes per annum, or more than a quarter of current capacity, from mid-FY22."
Fitch expects limited impact on JSWS's steel output despite a resurgence in Covid-19 cases in India and see upside risk to FY22 margin assumption if robust steel prices are sustained.
Capex is also likely to increase after a cut in FY21 as the company re-focuses on growth. Although Fitch assumed higher capex from FY22, a further increase in JSWS's spending plans remains a risk as expectation for leverage implies that it will stay well within company's net debt to EBITDA ratio target of 3.75x.
JSWS reported consolidated cash and cash equivalents of Rs 13,900 crore as of December 31 last year. It had short-term working capital debt and acceptances of around Rs15,000 crore billion and long-term debt maturities (including long-term customer advances) of Rs 9,500 crore and Rs 13,000 crore in FY22 and FY23 respectively.