Steel consumption growth slowed to about 3.5 per cent for the nine months ended December 2019 from 7.5 per cent growth for the fiscal year ending March 2019.
The slowdown was driven by sluggish economic activity, which has weakened demand from steel-using industries such as manufacturing and automotive, and by slow government disbursements towards infrastructure projects.
Moody's expects a slight pickup in steel demand in fiscal 2021, along with a higher proportion of finished steel products with the commissioning of JSW's cold rolling mill facility, and concerted backward integration efforts into increasing the production of its key input, iron ore.
These efforts will support profitability at levels appropriate for the company's Ba2 rating.
"The change in outlook to stable also reflects our expectation that JSW will soon complete the acquisition of a minority stake in Bhushan Power and Steel Ltd (BPSL) from the distressed company's lenders which will raise some execution risk," added Chaubal.
JSW has been identified as the highest bidder for BPSL. While final deal details are not known, Moody's expects the acquisition cost to be around 2.7 billion dollars and JSW's cash outflow is expected to be limited to 600 million dollars.
The Ba2 ratings reflect JSW's large scale and strong position in its key operating markets, competitive conversion costs, good product and end-market diversification, and increasing focus on value-added products and retail markets.
The ratings also incorporate JSW's exposure to the inherently cyclical steel industry, its relatively limited raw material integration and risks associated with the execution of the BPSL acquisition, said Moody's.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.