Fitch raises Tata Steel rating to 'BBB-'

On October 9, Fitch Ratings raised Tata Steel Limited's Issuer Default Rating (IDR) from 'BB+' to 'BBB-'. Additionally, the rating agency has kept its outlook constant in this situation.

Due to less uncertainty and reduced financial risk related to its UK operations, Tata Steel Limited's (TSL) Standalone Credit Profile (SCP) was revised from "bb" to "bb+," which led to the upgrading.

The rating agency observed that the strategic move made by Tata Steel to replace blast furnaces with more affordable and environmentally friendly electric arc furnace (EAF)-based steelmaking capacity is anticipated to improve the cost competitiveness of its UK operations.

In addition, Fitch noted that Tata Steel's IDR has been raised one notch as a result of possible help from the Tata Group.

Fitch's decision to take these actions is based on the expectation of a substantial improvement in Tata Steel's profitability in the United Kingdom. According to Fitch, "TSL's plan to install EAF-based steelmaking capacity of 3 million tonnes per annum (mtpa) at Port Talbot, UK, within the next three-four years should allow the UK business to generate a profit even during industry downturns, instead of being a drag on TSL's financial performance."