Tata Steel Set for Credit Revival Amid Domestic Demand Surge

CreditSights anticipates an improvement in Tata Steel's credit metrics in FY25, spurred by strong infrastructure-led domestic demand and lower coking coal prices. Despite a 64.59% fall in net profit for the March quarter, robust EBITDA growth and reduced capex are expected to drive better credit performance.

CreditSights, a ratings firm, projected on Monday that Tata Steel's credit metrics will witness an enhancement in the current fiscal year, benefitting from rising infrastructure-driven domestic steel demand and decreasing coking coal prices.

Last week, Tata Steel announced a 64.59% drop in consolidated net profit, amounting to Rs 554.56 crore for the March quarter, compared to Rs 1,566.24 crore in the previous year, due to lower realizations and expenses related to exceptional items.

According to CreditSights, a division of FitchSolutions, the company’s credit metrics are poised for significant improvement in FY25. The net leverage is expected to improve, propelled by substantial EBITDA growth and reduced capital expenditure. The firm's FY25 EBITDA is forecasted to grow in the mid-20% range year-over-year, driven by robust domestic demand and marginally higher steel price realizations, despite increased iron ore costs, mitigated by lower coking coal prices.