Standard & Poor’s Rating Services has lowered the corporate credit rating of Tata Steel from BBB to BB, but has retained a positive outlook for the company.
It had placed Tata Steel under credit watch in October, after the company announced its intention to take over British steel maker Corus Group Plc.
“The rating on Tata Steel reflects the consolidated credit profile of the company and its subsidiaries, including Corus,” said Standard & Poor’s credit analyst Anshukant Taneja. Tata Steel intends to fund its $12.9 billion acquisition of Corus primarily through debt, which is legally structured as non-recourse to the parent company.
Interestingly, the Tata Steel scrip went up by 3.4 per cent
(Rs 21.55) to close at Rs. 655.50 and the ratings downgrade had no impact on the scrip performance.
Last month, on June 7, ASK Securities had put a buy on Tata Steel with a possibility of a 28 per cent increase in the scrip’s price. They had put a target of Rs. 732 on the scrip at a time when it was at Rs. 515.
Merchant banking sources, not willing to be quoted said “The downgrade will not have much of an impact on the fund raising or the company in future as the steel industry looks very positive right now.”