Fitch Ratings has upgraded JSW Steel Limited's Long-Term Issuer Default Rating and senior unsecured bonds to 'BB+' from 'BB', and removed the ratings from Rating Watch Positive, according to an exchange filing on Monday. The outlook is now Positive, reflecting expectations of further leverage improvement.
Key Drivers of the Upgrade
The upgrade follows JSW Steel receiving Rs 294 billion in March 2026 and Rs 79 billion in June 2026 from the sale of steel assets to JSW JFE Kalinga Steel Limited (JJKSL), its newly formed 50:50 joint venture with Japan's JFE Steel Corporation. Fitch said the upgrade reflects its expectation that EBITDA net leverage, including proportionate consolidation of JJKSL, will remain below 2.7x and could improve further to around 2.0x from FY27. A sustained fall below 2.0x could trigger an upgrade to 'BBB-'. Leverage was 4.0x in FY25 and is estimated at 2.5x in FY26.
Deleveraging and Financial Outlook
Fitch expects deleveraging to be aided by rising EBITDA, cost efficiencies, and debt reduction using JJKSL proceeds, even as capex stays high and free cash flow remains negative. JSW has also set lower public net debt/EBITDA and net debt/equity targets. Standalone EBITDA per tonne is forecast at INR 10,750 in FY27 and INR 11,250 in FY28, up from around INR 9,700 in FY26. Support comes from India's 11-12% safeguard duties on certain steel imports until April 2028, strong domestic demand, and easing iron ore prices.
Volume Growth and Expansion Plans
Sales volume is projected to grow about 8% annually over FY28-FY30, driven by the 5 mtpa brownfield expansion at Dolvi, debottlenecking, and the merger of BMM Ispat. Fitch expects India's steel consumption to expand 8% on infrastructure, construction, and manufacturing demand. JSW has raised its capex plan to INR 230-275 billion annually over FY27-FY29 as it targets 50.3 mtpa capacity by FY30, up from 44.4 mtpa earlier. Equity investment in JJKSL and a new joint venture with POSCO is pegged at INR 21 billion a year over FY28-FY31, with limited impact on metrics. The two JVs are expected to add 11.5 mtpa by FY32.
Iron Ore Self-Sufficiency and Cost Position
Iron ore self-sufficiency is seen rising to 50% by FY31 from 33% in FY26. Vijayanagar remains in the first quartile of WoodMac's global cost curve. Fitch noted liquidity remains strong with INR 413 billion cash at FYE26, plus undrawn lines. The Positive Outlook reflects potential for further leverage improvement. A sustained rise above 2.7x could lead to negative action.
Capacity and Stock Performance
JSW Steel had 31.9 mtpa primary capacity in India as of 1HFY26, rising to 35.7 mtpa on a consolidated basis, including its share of JJKSL. On Monday, the stock ended nearly 1% higher at Rs 1,242.10 on the National Stock Exchange.
