Outlook On SAIL’s Long-Term Bonds Downgraded To Negative

Care Ratings downgraded the outlook on Steel Authority of India Ltd.’s long-term bonds to negative citing subdued profitability due to a sharp increase in coking coal prices.

The company’s over Rs 15,000 crore worth of bonds were downgraded to AA- from AA (low credit risk). The steelmaker’s lower-than-expected financial performance in the year to March led to the negative outlook, the ratings agency said. SAIL's dependence on external debt increased during the period, it said.

The anti-dumping duty imposed on various steel products boosted steel prices. The benefit was, however, offset by higher coking coal prices for the state-run steelmaker, Care Ratings said.

“The outlook may be revised to ‘stable’ if SAIL’s profitability and debt coverage metrics improve, supported by better capacity utilisation from newly commissioned facilities and better net sales realisation,” it said.

SAIL has been modernising and expanding its integrated steel plants in Bhilai, Bokaro, Rourkela, Durgapur and Burnpur and the special steel plant in Salem. However, Union Steel Minister Chaudhary Birender Singh recently criticised the company for the slow progress as it missed the deadlines.

The government has linked fresh investments in SAIL and Rashtriya Ispat Nigam Ltd. to completion of existing projects.