Fitch Downgrades JSW Steel and Tata Steel to ‘BB-’ With Negative Outlook Due to Weak Demand
Fitch Ratings has downgraded the issuer default ratings (IDR) of two Indian steel companies - JSW Steel Ltd (JSWS) and Tata Steel Ltd (TSL) - to 'BB-' from 'BB' after completing a portfolio review on lower demand and weak prices for steel.
 
In a statement, the ratings agency says, "The portfolio review follows our expectation of a decline in steel demand in India for the year ending March 2021 (FY21), compared with our earlier assumption of a mid-single-digit volume increase, due to the economic impact of the coronavirus pandemic." 
 
"The Indian Steel Association has forecast an 8% drop in domestic demand in FY21, and we assume standalone sales volume for JSWS and TSL will decline by 6%. We also expect lower earnings before interest, taxes, depreciation and amortization (EBITDA) margin in FY21 due to the volume drop and weaker steel prices. We assume volume and margins will increase significantly in FY22 from a weak base, supported by a broader economic recovery," Fitch added.
 
Fitch has also downgraded Tata Steel UK Holdings Ltd's (TSUKH) long-term IDR to 'B-' from 'B' with negative outlook. The agency has also downgraded JSWS's and TSL's senior unsecured rating to 'BB-' from 'BB'. 
 
Simultaneously, Fitch Ratings says it is withdrawing TSUKH's long-term IDR because the company is no longer issuing debt and there is no Fitch-rated debt outstanding following refinancing by TSL for its European operations in January 2020. 
 
According to the ratings agency, JSWS's downgrade is based on its expectation that the company's gross debt/EBITDA leverage, including acceptances and a long-term customer advance, will remain above its previous negative rating action threshold of 4.0 times over the next three years. 
 
"We estimate JSWS's gross leverage increased to above 6.0 times in FY20 from 3.3 times in FY19 due to sharply lower EBITDA and negative free cash flow (FCF). JSWS's sales volume fell and its EBITDA margin narrowed in FY20 due to weaker demand in India, lower steel prices and the extension of its working-capital cycle towards the end of the financial year due to stoppage of business activity following government-mandated restrictions to control the spread of COVID-19," Fitch says.
 
Commenting on TSL, the ratings agency says, its ratings downgrade is based on its expectation that consolidated gross debt/EBITDA leverage of the company will remain above its previous negative rating action threshold of 4.0 times over the next three years. It says, "We estimate TSL's leverage increased to around 7.0 times in FY20 from 3.4 times in FY19 due to sharply lower EBITDA and negative FCF. We estimate TSL had lower standalone sales volume and EBITDA margin in FY20 due to the weaker demand in India and lower steel prices, along with an EBITDA loss in Europe."
 
"We estimate TSL's EBITDA will decline further in FY21 and leverage will increase to above 10.0 times," Fitch says, adding, "We expect leverage to gradually improve to around 5.0x in FY22 due to higher EBITDA, controlled capex and positive FCF. We also assume the European operations will start contributing to EBITDA from FY22, helped by TSL's ongoing efforts to improve efficiency and cut costs. Gains in Europe that are slower than our expectations could exacerbate the impact of weak industry conditions on TSL's financial and overall credit profile, and this risk is reflected in the negative outlook."
 
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    Hindustan Sanitaryware sues ICICI Securities for report saying Jaquar became top brand
    Leading sanitaryware brand, HSIL Limited, has a filed a case against prominent brokerage ICICI Securities for a "defamatory and disparaging" research report, which said that Jauguar has become Indias No. 1 sanitaryware brand.
     
    HSIL said the report led to "widespread defamation" of HSIL and "disparagement of its products and brand".
     
    This is one of the rare cases where a company filed a suit against a leading brokerage for a research report. There have been some instances in the past, but they have been far and few. Brokerages have analysts tracking sectors and companies who then put out research reports about a company.
     
    "A highly defamatory, libelous, false, disparaging and malicious report published by ICICI Securities Ltd. titled 'Jaquar pips HSIL; becomes India' No.1 sanitaryware brand' on 28th April 2020 which was intended to be read by the public and it was widely publicised to all their clients, thereby leading to widespread defamation of the HSIL Ltd. (now Brilloca Ltd. post demerger) (hereinafter referred to as Company) and disparagement of its products and brand," HSIL said in a filing.
     
    On the failure of ICICI Securities to withdraw the report and issue a clarification as to the efalse and misleading' contents of the said report, the company has filed legal a suit titled eHSIL Ltd. & Anr Vs ICICI Securities & Ors' at the Delhi High Court.
     
    The Delhi HC vide the above said order directed deletion of the report from Linkedin by Jaquar & Company Pvt. Ltd, HSIL said in the filing.
     
    The said report was based on complete falsehood to substantially lower and damage the reputation and goodwill of the company, HSIL said. The report was also uploaded by Jaquar & Company on its Linkedin account.
     
    "The report was brought to the notice of the company on April 28 whereby the company contacted the concerned persons at ICICI Securities and brought to their notice the fallacies and illegalities of their report. On May 6, ICICI Securities, after acknowledging the incorrect data in its report, suo moto published an addendum (second report) to its false report to cover and save its reputation," it said.
     
    During the hearing, ICICI Securities undertook to withdraw the report dated April 28, and substitute it with the report dated May 6.
     
    "The Delhi High Court was pleased to pass the order, directing ICICI Securities to communicate the fact of the substitution of the report to all concerned. The court vide its order also directed deletion of the report dated April 28 from Linkedin by Jaquar & Company," HSIL said.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Jio Platforms Gets 5th Investor, KKR to Buy 2.32% stake for Rs11,367 crore
    US private equity fund KKR became the fifth big investor to buy stake in Jio Platforms Ltd, a unit of Reliance Industries Ltd (RIL). This Rs11367 crore investment is KKR's largest in Asia and will translate into a 2.32% stake in Jio Platforms on a fully diluted basis.
     
    Over the last month, leading technology investors, such as, Facebook, Silver Lake, Vista, General Atlantic and KKR have announced aggregate investments of Rs78,562 crore into Jio Platforms.
     
    Mukesh Ambani, chairman and managing director of Reliance Industries, said: "I am delighted to welcome KKR, one of the world's most respected financial investors, as a valued partner in our onward march to growing and transforming the Indian digital ecosystem for the benefit of all Indians. We are looking forward to leveraging KKR's global platform, industry knowledge and operational expertise to further grow Jio."
     
    According to Henry Kravis, co-founder and Co-chief executive of KKR few companies have the potential to transform a country's digital ecosystem in the way that Jio Platforms is doing in India, and potentially worldwide. "We are investing behind Jio Platforms' impressive momentum, world-class innovation and strong leadership team, and we view this landmark investment as a strong indicator of KKR's commitment to supporting leading technology companies in India and Asia Pacific," he says.
     
    Jio Platforms, a wholly-owned subsidiary of Reliance Industries, is a next-generation technology platform focused on providing high-quality and affordable digital services across India, with more than 388 million subscribers. 
     
    Jio Platforms has made significant investments across its digital ecosystem, powered by leading technologies spanning broadband connectivity, smart devices, cloud and edge computing, big data analytics, artificial intelligence, Internet of Things, augmented and mixed reality and blockchain.
     
    Founded in 1976, KKR has a long history of building leading global enterprises and successfully investing in businesses in the technology sector, including BMC Software, ByteDance and GoJek through its private equity and technology growth funds.
     
    Since inception, KKR has invested over $30 billion (total enterprise value) in tech companies, and today the firm's technology portfolio has more than 20 companies across the Technology, Media and Telecom sectors. In addition, India has been a key strategic market for KKR with a history of investing in the country since 2006.
     
    KKR is making the investment from its Asia private equity and growth technology funds. The transaction is subject to regulatory and other customary approvals.
     
    Earlier this week equity firm General Atlantic had bought 1.34% stake in Jio Platforms for Rs6,598.38 crore (about $875 million). 
     
    Earlier this month, investment firm Vista Equity Partners invested Rs11,367 crore for a 2.32% stake in Jio Platforms, the holding company of Reliance Jio Infocomm.
     
    In April 2020, Facebook invested over Rs43,000 crore for a 9.99% stake in India's oil-retail-telecom conglomerate-led Jio Platforms -- the largest investment for a minority stake by a technology company anywhere in the world and the largest FDI in the Indian tech sector.
     
    This was followed by US private equity firm Silver Lake, which invested Rs5,655 crore (nearly $750 million) for 1.15% stake into Jio platforms.
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