S&P reaffirms Tata Steel's 'BBB' rating with stable outlook

S&P Global Ratings affirmed Tata Steel's issuer credit ratings at 'BBB' with a stable outlook. This reflects S&P's expectation that increased volumes and cost-reduction efforts will offset the impact of growth projects on the company's leverage. The stable outlook anticipates a recovery in credit metrics over the next 12-18 months, driven by higher output in India and reduced losses in the U.K.

Despite expectations of elevated debt due to sizable growth investments, particularly the Neelachal Ispat Nigam Ltd. (NINL) expansion, Tata Steel aims to fund its capital expenditure primarily through operating cash flow. The company forecasts its ratio of funds from operations (FFO) to debt to improve to 26%-27% in fiscal 2027, up from an estimated 21% in fiscal 2026. This improvement is supported by an anticipated 30% increase in EBITDA to INR410 bn in fiscal 2027.

The planned expansion at NINL is expected to double Tata Steel's long product output to 10 mt by fiscal year 2030, potentially adding INR75 bn to the consolidated EBITDA. Additionally, a ramp-up at the Kalinganagar facility in India is projected to add 2.5 mt to total output in fiscal 2027, enhancing both product mix and EBITDA per ton.