The agency lowered its long-term foreign currency issuer credit rating on Tata Steel and subsidiary ABJA Investment Co. Pte. Ltd., and the issue rating on various US-dollar denominated senior unsecured notes ABJA has issued, to 'B+' from 'BB-'.
"The downgrade mainly reflects our expectation that the improvement in Tata Steel's earnings and financial profile, on which the 'BB-' rating was based, is unlikely to materialise in the next 12-18 months. This is mainly due to Covid-19 related disruptions and the consequent economic effects," it said.
S&P Global Ratings has also lowered its rating on
Even before recent developments, the agency said, Tata Steel's earnings in the first nine months of fiscal year ended March 31, 2020, had under-performed its expectations.
However, meaningful price hikes between December 2019 and March 2020, together with a seasonally stronger January-March quarter meant there was still potential for the company's financial profile to improve, but now S&P Global Ratings sees this as unlikely.
"(Instead) We see a more significant impact on Tata Steel's credit profile coming from its higher cost European operations," it said.
While both the company's Europe plants (in the UK and the Netherlands) are still running, they are doing so at significantly reduced capacity. "In our base case, we assume depressed volumes for at least one quarter, followed by a recovery to more normal levels," it noted.
The agency further said it could lower the rating on Tata Steel if the company's credit profile remains pressured for longer than current expectations.
The outlook would be revised back to stable only if the impact of the economic slowdown is less than our current expectation, it said.
Read Also: Accenture launches People+ Work connect to help fired employees find jobs
Capgemini India, Cognizant and others who are giving salary hikes in times of Coronavirus