S&P Global Ratings has affirmed Tata Steel’s issuer credit rating at ‘BBB’ with a Stable Outlook on December 24, 2025. The affirmation reflects the expectation that higher volumes and cost-reduction initiatives will balance the effects of announced growth projects. The Stable Outlook indicates an expectation of credit metric recovery over the next 12-18 months, driven by higher output in India and reduced losses in the U.K.
Credit Rating Maintained
On December 24, 2025, S&P Global Ratings affirmed the ‘BBB’ issuer credit ratings for both Tata Steel and ABJA Investment Co. Pte. Ltd., along with the issue-level rating for ABJA’s senior unsecured notes. The Stable Outlook indicates anticipated improvements in key financial metrics over the near term.
Factors Influencing the Rating
The ratings affirmation acknowledges Tata Steel’s ongoing growth projects, which may delay deleveraging but are expected to be counterbalanced by increased production volumes and cost efficiencies. S&P anticipates that capital expenditure will be primarily funded through operating cash flow.
Growth and Capital Expenditure
Planned expansions at Neelachal Ispat Nigam Ltd. (NINL) and new downstream capacity additions are projected to increase annual capital expenditure by INR100 billion-INR200 billion. This level of investment is expected to result in negative discretionary cash flow and a delay in reducing debt levels. Adjusted debt is projected to reach INR1,100 billion in fiscal 2028.
Projected Earnings and Efficiency
Tata Steel anticipates savings of INR30 billion-INR35 billion through decreased losses in its U.K. operations and optimized iron ore pellet sourcing, contributing an incremental EBITDA per ton of INR1,000 at the consolidated level. The company’s EBITDA is forecasted to increase by 30% to INR410 billion in fiscal 2027.
Sensitivity Factors
The company’s credit metrics are sensitive to EBITDA per ton levels, with the ratio of funds from operations (FFO) to debt potentially approaching 20% if there are delays in the Kalinganagar facility ramp-up or U.K. turnaround. The FFO to debt ratio could increase to 26%-27% with improved earnings.
NINL Expansion
The proposed expansion at NINL is aimed at doubling Tata Steel’s long product output to 10 mt by fiscal year 2030. This expansion will also include NINL’s iron ore mines, which would improve production costs and EBITDA per ton.
Outlook Considerations
The stable outlook reflects expectations that Tata Steel’s credit metrics will improve over the coming 12-18 months. The ratio of FFO to debt is expected to improve to comfortably above 20%, primarily through operating cash flow.
Source: BSE
