International credit ratings agency Fitch Ratings’ subsidiary India Ratings and Research (Ind-Ra) has announced that it has downgraded Indian steelmaker JSW Steel Limited’s long-term credit rating to ‘IND AA-’ from ‘IND AA’. The outlook is negative.
Ind-Ra stated that the downgrade reflects the deterioration in JSW Steel’s consolidated net leverage (debt/EBITDA) and the decline in its funds flow from operations in the financial year 2015-16. JSW Steel’s consolidated EBITDA fell to INR 4,957/mt in the financial year 2015-16 from INR 7,783/mt in the previous fiscal year following a substantial decline in realization due to import pressure and predatory pricing. The credit metrics were also affected by the debt-led capital expenditure incurred by the company during the given year for capacity enhancement. Meanwhile, the negative outlook reflects the risk of dilution in the protective measures undertaken by the government which could lead to a fall in JSW Steel’s realization and a further deterioration of its credit profile.