N Chandrasekaran hopes for export duty rollback but prepares Tata Steel for the worst

• Tata Steel is back in favour with ratings agencies and analysts, who are bullish on the steel sector’s future.
• The optimism comes on the back of Tata Steel’s plans to pare debt and increase capex, and a sustained performance could result in yet another round of ratings upgrades.
• A debt reduction plan also bodes well for the company at a time when interest rates are climbing.

Tata Steel seems to be back in favour a few weeks after facing challenging policy headwinds as the Indian government imposed hefty export duties to control prices of steel in the country. Analysts have revised their outlook to ‘positive’ and ‘overweight’ from ‘stable’.

Tata Steel’s chairman is hoping that the government’s export duty hike is a short-term measure.

“The government has been taking industry-specific steps to tackle inflation which we hope would be short-term measures. The steel industry in India is globally competitive and therefore Indian steel companies should be able to expand capacity,” the company’s chairman N Chandrasekaran said.

Ratings agencies are once again bullish on one of India’s largest steelmakers

Ratings agencies’ revisions however have not factored in the government's reversal of export duty hike on steel yet.

While Chandrasekaran is hoping for it, he is not relying completely on just that.

“To be more resilient to changing market demands and diversify its product portfolio and tap the growth opportunity in new materials, the company ventured into the new materials business comprising major verticals of composites, graphene and advanced ceramics including medical materials,” he said at the company’s annual general meeting held yesterday.

Moody’s upgraded its ratings saying that a further ratings upgrade will be on the cards if Tata Steel sustains its performance and improvements in its credit metrics. Its plan to pare debt by $1 billion a year should help with the latter.


Tata Steel is one of the most-indebted companies in India Inc., not just the Tata Group, with a total debt of over ₹75,000 crore (approx. $10 billion). The company has already announced plans to repay $1 billion a year, but it also has plans to spend $1-1.5 billion as capex.

Analysts at JP Morgan believe that Europe remains a “strong market”, while volume is picking up in India too. This should give the investors a lot of confidence as Tata Steel has asserted that it will expand its India operations.

Moody’s also upgraded their outlook for another major steel maker – JSW Steel – suggesting that there is optimism again in this crucial sector which has gained a lot of ground in Europe over the last two years.

Tata Steel is not relying only on rollback of export duty hikes

The steel industry has reaped the rewards of its competitiveness over the last two years, and more recently, it has capitalized on the sanctions on Russia to make record exports to Europe.

Over the last two years, the Indian steel industry has become so competitive that its exports surged to over $14 billion – more than the total exports between 2014-2020.

However, since early this year, the Tata Steel stock has experienced a lot of volatility. Earlier this month, it finally fell below ₹1,000 for the first time this year.


For comparison, Tata Steel shares surged nearly 500% between April 2020 and August 2021, going from ₹250 to ₹1450 in this span of time.

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