General Announcement::Intimation of Revision in Ratings

July 8, 2021

Singapore Stock Exchange

Singapore

Dear Sirs/Madam,

Sub: Intimation of Revision in Ratings under the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015

This has reference to Regulation 30(6) of the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 (the "Regulations"). In accordance with the said Regulation(s), please find below the details of revision in ratings for Company:

Name of the	Credit Rating	Type of Credit	Existing	Revised
Company	Agency	Rating
Tata Steel		Long-term credit	'AA'	'AA+'
CARE Ratings	Outlook:	Outlook:
Limited	rating
	Negative	Stable

The report from the credit rating agency covering the rationale for revision in credit rating is enclosed.

This is for your information and records.

Yours faithfully,

Tata Steel Limited

Parvatheesam Kanchinadham

Company Secretary &

Chief Legal Officer (Corporate and Compliance)

Encl: As Above

Registered Office Bombay House 24 Homi Mody Street Fort Mumbai 400 001 India

Tel [phone] Fax [phone] Website www.tatasteel.com

Corporate Identity Number L27100MH1907PLC000260

Press Release

Tata Steel Limited

July 07, 2021

Ratings

Facilities	Amount (Rs. crore)	Ratings1	Rating Action
Non-Convertible	17,500.00	CARE AA+; Stable	Revised from CARE AA; Negative
Debentures		(Double A Plus; Outlook: Stable)	(Double A; Outlook: Negative)
Total	17,500.00
(Rs. Seventeen Thousand and
Instruments
Five Hundred Crore only)
Long Term Bank	-	-	Withdrawn
Facilities
Non-Convertible	-	-	Withdrawn
Debentures
Perpetual Bonds	-	-	Withdrawn

Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers

The revision in rating and outlook assigned to the instruments of Tata Steel Limited (TSL) factors in the improvement in performance witnessed during FY21, sequentially from Q2-FY21 onwards, particularly in Indian operations, on the back of revival in demand and increased steel prices leading to substantial cash flow generation and sizeable deleveraging at the end of FY21 resulting in improvement in debt coverage indicators. TSL's European operations also, although had reported operating losses for whole of FY21, have witnessed improvement in profitability (from loss to profit) during Q4-FY21, largely on the back of significantly higher steel prices along with lower coking coal prices, which has more than offset the sharp increase in iron-ore prices. Given the current price trend in Europe, the European operations are envisaged to report operating profit in near future as well. However, risk emanating from the downside risk in case of adverse movement in steel and raw material prices for the European operations continues to remain. The rating continues to factor in the established track record of TSL as one of India's largest integrated steel manufacturing company with enriching product-mix having significant captive raw material security and global presence aided by geographically diversified production facilities. Furthermore, TSL also enjoys immense financial flexibility by its virtue of being part of the Tata Group of Companies.

The above rating strengths are, however, moderated by company's presence in highly cyclical steel industry and exposure to foreign exchange risk.

CARE has withdrawn ratings assigned to the bank facilities, perpetual bonds and Non-Convertible Debentures, as they have been fully repaid and CARE has received the 'No Dues Certificates' of the same.

Rating Sensitivities

Positive factors

• Improvement in overall performance leading to improvement in operating profitability level (Standalone PBILDT per tonne more than Rs. 16,000 annually on sustained basis) and debt coverage indicators (Net Debt/PBILDT level below 1.5x on sustained basis)
• Structural changes/improvement in European operations which would result into improvement and sustenance of positive cash flow generation from these geographies
• Divestment in its overseas operations leading to reduction in debt levels

Negative factors

• Deterioration of operational and financial performance leading to decline in operating profitability levels (Standalone PBILDT per tonne less than Rs. 9,000 annually) or interest coverage ratio below 4.00 times on a sustained basis
• Debt-fundedcapex or acquisitions leading to increase in gross debt impacting the overall gearing ratio (above 1.50x) and debt coverage indicators (Net Debt/PBILDT above 2.60x) on a sustained basis
• Significant financial support provided to European operations by the parent / group companies

Detailed description of key rating drivers:

Key Rating Strengths

Reputed promoter group and experienced management

Tata Steel Limited is among the leading companies of the conglomerate - Tata Group. The group is also one of the largest conglomerates in India with over 100 operating companies in key business sectors such as steel, automotive, information

1Complete definition of the ratings assigned are available at www.careratings.comand other CARE publications

1	CARE Ratings Limited

Press Release

technology, engineering, energy, aviation, power, mining, consumer products, chemicals, etc. The group, through its parent holding company for all group companies - Tata Sons Private Limited, holds 32.93% stake in Tata Steel Limited as on March 31, 2021. The operations of the company are handled by a very capable management team, headed by Chief Executive Officer & Managing Director - Mr. T. V. Narendran and Executive Director & Chief Financial Officer - Mr. Koushik Chatterjee.

Diversified product mix catering to wide range of sectors/industries

The company has presence throughout the value chain of steel manufacturing - from mining & processing of iron ore and coal to production and distribution of finished products. The company is one of the most geographically diversified steel producers, with operations in various countries and commercial presence in more than 50 countries across the globe. The product mix of the company includes flat products such as hot rolled coils, cold rolled coils, galvanized steel and long products such as wire rods, rebars; ferro alloys, tubes, bearings, wires, etc. The product segments cater to agriculture, automotive, construction, consumer goods, energy and power, engineering, material handling, etc.

Captive iron and coal mines for standalone operations partly insulating from volatility in raw material prices

The company owns coal, iron ore and manganese & chrome mines at various locations, thereby backward integrating itself for its raw material requirements. For its standalone operations, the company is 100% backward integrated for its iron ore requirement, while it is 27% backward integrated for its coal requirement. Thus, it partly de-risks itself from susceptibility to volatility in prices of these key raw materials. Any adverse fluctuations in raw material prices can impact the prices of steel and thus could further impact both the sales realizations and operating profitability of the company. For the European operations, which form sizeable portion of overall operations, the entire requirement of key raw materials is met from the market.

Improvement in overall performance during FY21 mainly from Q2-FY21 onwards

With the outbreak of the pandemic and the consequent measures like imposition of lockdown by the governments across the globe significantly impacted the economies and led to both demand and supply side disruptions during first quarter of FY21. Thus, the overall performance was impacted during Q1-FY21 on account of weakened demand scenario, decline in international steel prices and supply side disruptions. Post opening up of economies and stimulus measures announced by various governments around the globe, especially China, led to revival in demand. There have been numerous price hikes from Q2-FY21 onwards leading to improvement in sales realization per tonne which resulted in improvement in EBITDA per tonne. The higher steel prices resulted in improvement in realizations across geographies and improved operating EBITDA per tonne mainly during second half of FY21. The consolidated sales realization per tonne stood at Rs. 54,840 while EBITDA per tonne stood at Rs. 10,839 during FY21. The Indian operations continued to showcase healthy performance on the back of increase in steel prices, lower coking coal prices and insulation from increase in iron-ore prices due to captive mines. The European operations continued to report operating losses for second consecutive year, although it has posted operating profit during Q4-FY21.

Strong Indian operations are offset by operating losses in European operations during FY21

The domestic operations continued to demonstrate healthy performance, comprising mainly of standalone operations, Tata Steel BSL and Tata Steel Long Products. The domestic operations exhibited strong performance as domestic economy witnessed gradual recovery post reopening of the economy. The standalone EBITDA per tonne stood at Rs. 17,761 in FY21, while operating losses at European operations dragged consolidated EBITDA per tonne to Rs. 10,839. The European operations were impacted mainly in the first half of FY21 with lower deliveries and lower realizations. However, the European operations have reported operating profit during Q4-FY21 on the back of significant increase in steel prices.

Significant deleveraging undertaken during FY21, mainly in Q4-FY21, leading to improvement in debt coverage indicators With significant cash flows during the second half of FY21, the company has undertaken sizeable deleveraging of around USD 4 billion which has improved overall gearing ratio to 1.26 times as on March 31, 2021. The Net Debt/PBILDT ratio improved to 2.43 times as on March 31, 2021, on the back of sizeable deleveraging and improved profitability levels.

The company has mentioned that it continues to aim at deleveraging plan of atleast USD 1 billion annually. With the envisaged profitability levels in FY22 and FY23, the financial leverage is envisaged to improve gradually although the company has an on-going growth capex to be completed by FY24 (Kalinganagar Phase-II: balance capex of around Rs. 17,700 crore at the beginning of FY22). CARE continues to assume capex funding to be partly met through external borrowings. The company has guided capex plan of Rs. 11,000 crore for FY22, including growth and maintenance capex. Further, CARE would closely monitor the following event - the divestment plans for its overseas operations in Europe and South-East Asia.

Key Rating Weaknesses

Cyclicality of the steel industry

The steel industry is sensitive to the shifting business cycles, including changes in the general economy, interest rates and

2	CARE Ratings Limited

Press Release

seasonal changes in the demand and supply conditions in the market. Apart from the demand side fluctuations, the highly capital intensive nature of steel projects along-with the inordinate delays in the completion hinders the responsiveness of supply side to demand movements. This results in several steel projects bunching-up and coming on stream simultaneously leading to demand supply mismatch. Furthermore, the producers of steel products are essentially price-takers in the market, which directly expose their cash flows and profitability to volatility of the steel industry.

Liquidity Analysis

Strong - The liquidity is marked by sufficient cushion in accruals vis-à-vis its repayment obligations in FY22 and FY23. The cash and cash equivalent stood at Rs. 13,133 crore as on March 31, 2021. The fund-based working capital limits have been utilized to minimal extent (out of limits in the range of Rs. 1,438 crore - Rs. 1,738 crore) during the last 12-months ended March 2021. While the Non-Fund based limits are utilized to the extent of 57% (out of limits in the range of Rs. 7,000 crore - Rs. 9,000 crore) during the last 12-months ended March 2021. The company has capex plans to the tune of Rs. 11,000 crore during FY22. Furthermore, the company enjoys financial flexibility by virtue of being a part of Tata Group.

Analytical approach: CARE has adopted a consolidated approach on account of operational and financial linkages among entities. The list of entities whose financials have been consolidated has been mentioned under Annexure 5.

Applicable Criteria

Criteria on assigning 'Rating Outlook' and 'Credit Watch' to Credit Ratings

CARE's Policy on Default Recognition

Financial Ratios - Non-Financial sector

Liquidity Analysis of Non-Financial Sector Entities

Rating Methodology - Notching by factoring linkages in Ratings

Rating Methodology - Consolidation

Rating Methodology - Manufacturing Companies

Rating Methodology - Steel Sector

About the Company

Tata Steel Limited was established as India's first integrated steel company in the year 1907 by Mr. Jamsetji N. Tata, the founder of the Tata Group. The company has presence across the entire value chain of steel manufacturing from mining and processing iron ore and coal to producing and distributing finished products. The company offers a broad range of steel products such as hot rolled, cold rolled, coated steel, rebars, wire rods, tubes and wires. Over the years, the company has grown substantially through organic and in-organic ways. The company acquired Corus Group PLC in April 2007, having an annual capacity of 17.4 million tonnes, which was later renamed as Tata Steel Europe in September 2010. Presently, the European operations consist of two facilities, one each in South Wales and Netherlands, with an annual production capacity of 12.10 million tonnes. In May 2018, the company acquired Bhushan Steel Limited (renamed as Tata Steel BSL Limited; annual capacity of 5.60 million tonnes) through NCLT (National Company Law Tribunal) route and acquired the steel business of Usha Martin Limited (having annual capacity of around 1 million tonnes) during FY20 through its subsidiary - Tata Steel Long Products Limited.

Brief Financials (Rs. crore)	FY20 (A)	FY21 (A)
Total operating income	1,51,321	1,58,909
PBILDT	19,455	31,224
PAT	1,172	8,190
Overall gearing (times)	1.67	1.26
Interest coverage (times)	2.57	4.10

A: Audited

The financials have been reclassified as per CARE standards.

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

Rating History for last three years: Please refer Annexure-2

3	CARE Ratings Limited

Press Release

Annexure-1: Details of Instruments/Facilities

Name of the

Date of

Coupon

Maturity

Size of the

Rating assigned

ISIN

Issue

along with Rating

Instrument

Issuance

Rate

Date

(Rs. crore)

Outlook

Fund-based - LT-Term Loan

-

-

-

-

0.00

Withdrawn

Bonds-Perpetual Bonds

-

March 18, 2011

11.80%

-

0.00

Withdrawn

Bonds-Perpetual Bonds

-

May 11, 2011

11.50%

-

0.00

Withdrawn

Debentures-Non

-

December 22,

10.25%

-

0.00

Withdrawn

Convertible Debentures

2010

Debentures-Non

-

January 06,

10.25%

-

0.00

Withdrawn

Convertible Debentures

2011

Debentures-Non

-

January 24,

9.15%

-

0.00

Withdrawn

Convertible Debentures

2013

Debentures-Non

INE081A08181

April 23, 2012

2%

April 23,

1500.00

CARE AA+; Stable

Convertible Debentures

2022

Debentures-Non

INE081A08215

October 04,

8.15%

October 01,

1000.00

CARE AA+; Stable

Convertible Debentures

2016

2026

Debentures-Non

INE081A08223

March 01, 2019

9.84%

March 01,

4315.00

CARE AA+; Stable

Convertible Debentures

2034

Debentures-Non

INE081A08231

March 13, 2020

7.70%

March 13,

670.00

CARE AA+; Stable

Convertible Debentures

2025

Debentures-Non

INE081A08249

April 17, 2020

7.85%

April 17,

1025.00

CARE AA+; Stable

Convertible Debentures

2023

Debentures-Non

INE081A08256

April 22, 2020

7.85%

April 21,

510.00

CARE AA+; Stable

Convertible Debentures

2023

Debentures-Non

INE081A08264

April 27, 2020

7.70%

April 27,

1000.00

CARE AA+; Stable

Convertible Debentures

2023

Debentures-Non

INE081A08272

April 30, 2020

7.95%

October 30,

500.00

CARE AA+; Stable

Convertible Debentures

2023

Debentures-Non

INE081A08280

April 30, 2020

7.85%

April 28,

500.00

CARE AA+; Stable

Convertible Debentures

2023

Debentures-Non

INE081A08298

May 20, 2020

8.25%

May 19,

1000.00

CARE AA+; Stable

Convertible Debentures

2023

Debentures-Non

INE081A08306

June 03, 2020

8.08%

June 02,

400.00

CARE AA+; Stable

Convertible Debentures

2023

Annexure-2: Rating History of last three years

Current Ratings

Rating history

Name of the

Sr.

Type

Rating

Date(s) &

Date(s) &

Date(s) &

Date(s) &

Instrument/Bank

Amount

No.

Rating(s)

Rating(s)

Rating(s)

Rating(s)

Facilities

Outstanding

assigned in

assigned in

assigned in

assigned in

(Rs. crore)

2021-2022

2020-2021

2019-2020

2018-2019

Debentures-Non

1)Withdrawn

1)CARE AA;

1.

Convertible

LT

-

-

-

-

(09-Oct-19)

Stable

Debentures

(28-Dec-18)

1)CARE AA;

Debentures-Non

1)CARE AA;

Stable

1)CARE AA;

2.

Convertible

LT

-

-

-

Negative

(18-Dec-19)

Stable

Debentures

(24-Sep-20)

2)CARE AA;

(28-Dec-18)

Stable

4

CARE Ratings Limited