India Ratings said that the upgrade reflects its expectation that, despite likely aggregate capex of about Rs 220 billion, TSL's consolidated adjusted net leverage (adjusted debt net of cash/EBITDAR) would improve and hover between 1.0x-2.0x in FY22 and FY23 (FY21: 2.7x; FY20: 6.0x), as significant cash flow generation would lead to a reduction in its consolidated gross debt.

The ratings agency said that reducing exposure to loss-making overseas units, sustained positive free cash flows at European operations, leading to lower refinancing requirements at overseas group entities, and the consolidated adjusted net leverage falling below 2.0x, on a sustained basis, may lead to a positive rating action.

However, sustained weak profitability of the European operations, substantial debt-led acquisitions and or higher-than-expected capex outflows, leading to the consolidated adjusted net leverage exceeding 3.0x, on a sustained basis, would lead to a negative rating action.

Tata Steel group is among the top global steel companies with an annual crude steel capacity of 33 million tonnes per annum.

The company recorded a consolidated net profit of Rs 12,548 crore in Q2 FY22 as against a net profit of Rs 9,768 crore in Q1 FY22, registering a growth of 28.5% on QoQ basis. Total revenue from operations rose by 12.9% QoQ to Rs 60,283 crore during the quarter. The steel maker's net profit and revenue have risen by 7.5 times and 54.8%, respectively, in Q2 FY22 as compared with Q2 FY21.

The scrip rose 0.21% to currently trade at Rs 1156.30 on the BSE.