Rating Rationale

Brickwork Ratings reaffirms BWR AA (SO) (Outlook Stable) rating for Tata
BlueScope Steel Ltds long term structured secured NCD Issues of 250 Cr with a
tenure of 5 years & 250 Cr with a tenure of 9 years.

Brickwork Ratings (BWR) reaffirms BWR AA (SO) (Pronounced BWR Double A Structured
Obligation) (Outlook Stable) Ratings1 for Tata BlueScope Steel Ltd.s (TBSL) NCD issues of
250 crores each, with tenures of 5 and 9 years respectively. Instruments with this rating are
considered to have high degree of safety regarding timely servicing of financial obligations.
Such instruments carry very low credit risk.
The rating factors, inter alia, the Companys strong parentage and BlueScopes internationally
established brand, Letter of Comfort issued by Tata Steel Ltd, TBSLs pan India presence and
growing demand for pre engineered buildings in India. However, the rating is constrained by
stiff competition in the pre-engineered buildings industry, low operating margins, and low
coverage ratios.
Background:
Tata BlueScope Steel Ltd. (TBSL) is a 50:50 joint venture between Tata Steel Ltd., and
BlueScope Steel, Australia, and was formed in 2005. TBSL operates in the SAARC region and
manufactures value added steel products for the construction industry. Its products include
pre-engineered buildings, metallic coated and colour coated steel sheets and roll-formed roof &
wall cladding solutions.
TBSLs operations can be classified under 2 divisions - the Buildings Division and the Coated
Steel Division. The Buildings Division is further divided into Building Solutions (BS) and
Building Products & Distribution (BPD). The BPD Division manufactures and markets rollformed roof & wall cladding, roof support systems, house framing systems and Pre-Engineered
Buildings (PEB). It has manufacturing facilities at Pune (Maharashtra), Bhiwadi (Rajasthan)
and Sriperumbudur (Tamil Nadu). The Building Solutions Division (BS) is responsible for
marketing pre-engineered buildings.
As part of the Coated Steel Division, TBSL has successfully commissioned a new facility at
Jamshedpur, Jharkhand, for captive production of metal coated and color coated steel products
in December 2011. The facility commissioned was Metal Coating Line (MCL) of 250,000
MTPA, which includes Coil Paint Line (CPL) of 150,000 MTPA. This enabled the company to
backward integrate its existing facilities, thus generating cost savings and better efficiencies
through captive utilization. Raw material for this plant is sourced from Tata Steel Ltd.

Please refer to www.brickworkratings.com for definition of the Ratings

www.brickworkratings.com

4 Feb 2014

Tata Steel Limited, which is a 50% joint venture partner in the company, has issued a letter of
comfort for an aggregate amount of Rs.500 Cr. The rating derives strength from this credit
enhancement from Tata Steel Limited.
Financial Performance:
TBSL achieved net sales of Rs. 1041.51 Crores for FY13, a growth of 45.84% y-o-y. While the
operating profit (before Depreciation, Interest and Tax) was Rs.7.92 Crores for FY13 as
compared to a loss of Rs.28.17 Crores in FY12, the Net loss increased to Rs.184.04 Crores in
FY13 from Rs.90.17 Crores in FY12. This was mainly due to the increased interest cost as the
interest costs on the debt raised for Jamshedpur unit was capitalized till FY12. The promoters
have issued shares worth Rs.210 Crores in FY13, and as a consequence, the Tangible Net worth,
after accounting for the losses was at Rs. 440.68 crores. Considering the total borrowings of the
company, Total Debt: Tangible Net worth ratio was at 2.19 as of FY13, compared to 1.98
previously.
Outlook:
The NCD issue of Tata BlueScope derives strength from the companys strong parentage, and
the support extended by Tata Steel, in the form of a Letter of Comfort. Although TBSL is
currently loss making, improvements in capacity utilization at its various facilities and reduction
in dependence on imports are expected to bring the company into profitability in near to
medium term.
Analyst Contact

Relationship Contact

analyst@brickworkratings.com425-24

bd@brickworkratings.com

Phone

Media Contact

1-860-425-2742

media@brickworkratings.com

Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources,
which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or
completeness of the information obtained. And hence, the information in this report is presented as is without any express or implied warranty
of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR
should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses
incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any
reasons.

www.brickworkratings.com

4 Feb 2014