Tata Group-Backed Steel Stock Zooms Over 2.5% After Moody's Upgrade Ratings

Tata Group-backed leading steelmaker, Tata Steel's share price zoomed over 2.5% on Tuesday after leading rating agency Moody's Investors Services upgraded the company's ratings to investment grade with a Baa3 issuer rating. Also, Moody's assigned the company's outlook to 'Stable' from positive.

In the early trade of Tuesday, Tata Steel shares advanced by 2.51% with an intraday high of Rs 130.55 apiece on BSE.

At the time of writing, the stock traded at Rs 129.60 apiece, up by 1.8%. Its market cap is over Rs 1.58 lakh crore.

The stock is moving closer to its 52-week high of Rs 134.85 apiece. From its 52-week low of Rs 95 apiece, Tata Steel shares skyrocketed by over 37% on the exchange.

On September 25, Moody's highlighted that the Baa3 issuer rating on Tata Steel reflects the company's large-scale, globally cost-competitive, vertically integrated steel operations in India (Baa3 stable).

Also, the sustained improvement in its European operations especially following the expected closure of the loss-making upstream operations in the United Kingdom (Aa3 negative); and additionally, the company's close association with its parent, Tata Sons are key positives.

In the case of the UK deal, Moody's said, "The likely improvement in its UK cost structure and the relatively better performing Dutch operations will ensure, in Moody's view, Tata Steel's credit profile remaining solid, even as steel prices remain soft and global steel demand weakens amid rising interest rates and a weak economic outlook in most end-user markets."

Recently, Tata Steel entered into a mega deal with the UK government for jointly investing 1.25 billion pounds in the state-of-the-art Electric Arc Furnace steelmaking at the Port Talbot site. T

However, Moody's rating also captures the company's exposure to the inherent volatility in steel prices and spreads, and the historically volatile performance of its European operations.

Nevertheless, the company's strong presence in the world's second-largest steel market, India, will be a key driver of the company's credit profile. India is expected to witness a rise in steel consumption at a 7% cumulative annual growth rate until 2030, fueled by continuous, large infrastructure investments as well as increasing demand from the auto sector.

Meanwhile, the stable outlook indicates Tata Steel's strengthening credit metrics that Moody believes can be sustained even as the company invests in building new capacity in India and Europe.