Moody's Upgrades Tata Steel's Issuer Rating to Baa2 (Stable)

Moody's Ratings has upgraded Tata Steel Limited's long-term foreign currency issuer rating to 'Baa2' from 'Baa3', with a stable outlook. This upgrade reflects the application of Moody's revised cross-sector methodology, which allows for entities to be rated above the sovereign after incorporating credit enhancement from a financially strong domestic parent. The Baa2 rating includes a one-notch uplift, reflecting Moody's expectation of extraordinary support from its parent, Tata Sons, in a stress scenario. This assessment is based on Moody's evaluation of Tata Sons' ability and willingness to support Tata Steel.

Tata Steel continues to benefit from its close association with Tata Sons and the broader Tata Group, including the strength of the Tata brand, which supports its access to funding and relationships with lenders and investors. The stable outlook reflects Moody's view that Tata Steel's earnings will strengthen and credit metrics will remain appropriate for the current rating as the company progresses on its growth plans. Factors that could lead to an upgrade include an upgrade of India's sovereign rating or a change in Moody's assessment of support from Tata Sons. Conversely, a downgrade of India's sovereign rating to Ba1 would lead to a downgrade of Tata Steel's rating, even without a deterioration in its financial profile. Aggressive debt-funded growth or high shareholder returns could also lead to a downgrade.