India Ratings Cuts JSW Steel’s Outlook, Says Leverage Will Rise In FY20
India Ratings and Research cut JSW Steel Ltd.’s outlook citing an expected increase in the steel major’s net debt-based leverage.
JSW Steel’s adjusted net debt to Ebitda is expected to rise to 3.5 times - 3.7 times this financial year on the back of a decline in per tonne Ebitda and outflows on account of debt-led capital expenditure, India Ratings and Research said in a rating note.
In FY19 and FY18, the leverage was 2.2 times and 2.6 times respectively.
India Ratings has affirmed JSW Steel’s long- term issuer rating at IND AA but the outlook has been revised to ‘Negative’ from ‘Stable’ since the last rating was issued in March.
The rating on Rs 5,351 crore non-convertible debenture was also revised.
JSW has announced reduction in the budgeted capital expenditure by about Rs 4,700 crore to about Rs 11,000 in FY20 as a measure to conserve cash in the background of benign economic situation.
The company has also deferred capex at its Baytown, Texas facility by around $240 million of the announced $500 million.
The rating agency expects outflows relating to any inorganic stressed asset acquisition in FY20 to be limited to Rs 5,000 crore and primarily to be executed through ring- fenced financial structures with only a minority stake by JSW Steel.
India Ratings expects JSW Steel’s FY20 liquidity to remain adequate with well-planned debt refinancing amid substantial capital expenditure outflows.