Tata Steel shares edged higher on October 10, a day after Fitch Ratings upgraded the company's Issuer Default Rating (IDR) from "BB+" to "BBB-". The upgrade came after Tata Steel's standalone credit profile (SCP) was revised to ‘bb+’ from ‘bb’. The stock was trading at Rs 124.60, up 0.6 percent on NSE at 9:35 am.
The revision followed the reduction in uncertainty and financial risk from Tata group company's UK operations. Fitch Ratings expects UK operations' cost competitiveness to improve in the coming months.
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Tata Steel will replace its blast furnaces with more cost-efficient and environment-friendly electric arc furnace (EAF)-based steel-making capacity. Other than improving profitability of its UK unit, its strong cost base in India will prove to be a major boost for the company. The company is expected to push its capex in the coming years.
“We expect EBITDA leverage to decline over the next three years on higher capacity, output and EBITDA. TSL aims to roughly double its capacity in India by 2030 but we think risks to its financial profile are mitigated by its focus on maintaining net debt/EBITDA, based on its calculations, of 2.0x or lower," Fitch Ratings said.
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Tata Steel share price performance, technicals
Tata Steel shares have risen 19.53 percent in the past year but underperformed the benchmark Nifty, so far, in 2023, rising just 3.4 percent compared to a 7 percent rise in the benchmark index during the period.
Technicals show that the relative strength index (RSI) of the stock stands at 43, implying that it's trading neither in the overbought nor in the oversold territory. Its one-year Beta is 1.21, implying very high volatility. The counter is trading below its 20 and 50-day moving averages but above 100 and 200-day moving averages.
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