International credit rating agency Moody’s has announced that it has upgraded the corporate rating of JSW Steel, one of the largest Indian steelmakers, to Ba2 from Ba3. The ratings outlook is stable.
Moody’s stated that the upgrade of the credit rating of JSW Steel reflects its expectation that JSW will continue to show improving credit metrics and its revenues will likely show a mid-single digit increase over the next 12-18 months.
Moody’s expects that India's steel consumption will continue to grow in the range of 5.5 percent and 6.5 percent, on the back of the Indian government's push for infrastructure projects, construction, power transmission and railway investments, as well as improving demand from the automotive sector. Rising domestic demand and an increasing proportion of value-added products will help JSW in preserving its market share in India. According to the credit rating agency, these factors, along with a favorable pricing environment, will improve the company's earnings growth.
Moody's also stated that the impact on JSW of the US Commerce Department's imposition of a 25 percent tariff to curb steel imports will be limited, given the company's relatively modest exposure to the US, which constituted less than three percent of JSW's total exports for the nine months ended December 31, 2017.
Meanwhile, the stable ratings outlook incorporates Moody's expectation that JSW's operations will continue to exhibit a solid performance, which will translate into a sustained improvement in its credit metrics.