Moody's to review JSW Steel rating for downgrade

Our Bureau Mumbai | Updated on April 14, 2020 Published on April 14, 2020

Moody's Investors Service has put the corporate rating of JSW Steel under review for downgrade. The ‘stable’ ratings outlook on the company is also under review.

Moody's expects to conclude the review within 90 days.

The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil price and asset price declines are creating a severe and extensive credit shock across the world.

The combined credit effects of these developments are unprecedented. The steel sector has been one of the most significantly affected by the shock given its sensitivity to consumer demand and sentiment.

The weaknesses in JSW’s credit profile, including its exposure to steel demand for manufacturing and volatile material costs, have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and it remains vulnerable to the outbreak continuing to spread, said Moody’s.

The action reflects the impact on JSW of the breadth and severity of the shock and the broad deterioration in credit quality it has triggered, it said.

“The review for downgrade reflects our expectation that weak steel demand will strain JSW's credit profile, at least through the fiscal year ending March 2021,” says Kaustubh Chaubal, Vice-President, Moody's.

“In fact, there is a distinct possibility JSW will remain in breach of our downgrade triggers for its Ba2 CFR.”

Even before the coronavirus outbreak, sluggish economic growth, weak demand and narrow product spreads had led to a deterioration in JSW's credit profile.

“The review reflects our concern that JSW will face significant challenges due to the coronavirus-led economic downturn, with declining sales, weak earnings and free cash flow generation because of tepid demand from automakers, manufacturing and other steel consuming industries,” adds Chaubal.

Moody's review for downgrade will focus on the outbreak's impact on JSW's operations in light of increasing restrictions on people's movement, the impact of the outbreak on demand, steel prices and product spreads, an analysis of cash burn rate and liquidity, as well as management's strategy for coping with prolonged, low and volatile commodity prices, the impact of potential counter measures such as capex deferment and any government measures to support the steelmaker's operations.

Published on April 14, 2020

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.