‘The Secretary, Listing Department BSE Limited TATA “The Manager, Listing Department National Sock Exchange of India Lined Apa o4, 2016 Phiroze Jeojeebhoy Towers, Exchange Plaza, Sth Fleer, Plt No. Cit, Dalal Steet, {G Block, Bandra:Kuia Complex, Bandra (), ‘Mumbai = 400 001, ‘Murai - 400 05. Maharashtra, Inca, Maharashtra, inci ‘Scrip Code: 600470 ‘Symbol TATASTEEL Dear Sirsttadam, ‘Sub: _Intimat Lon_in_Ratin BI (Listing Obligations and Disclosure Requirements), Regulations, 2015 This has reference to Regulation 30(6) of the SEBI (Listing Onlgations and Disclosure Requirements), Regulations, 2015 (he Regulations") ‘The sharp fal in international steel prices and the challenging conitions facing the global ‘toe industry tiggered a review of Tata Stets erect rating by Fish. The Long-Term Foreign ‘Currency leur Default Rating (IDR) has been downgraded by 1 atch, In accordance with the said Regulations), please find below the details of revision in ratings for Company and ts subsisiaies- [Mare ofthe | credit Ratog | a529 orn Company Agency. Type of Credit Reting Toa Sel Lang Te Foren Caren Het ton j Tata sie! Uk Long Tee Fri Cuneny | Holdings Lid Fitch Ratings IDR" ced eR nue ag onthe “Investment Co Company's guaranteed pee | ae ois Senloruneecured notes ‘The report from the credit rating agency covering the rationale fr revision in erect rating is enclosed ‘This is for your information and records. Yours faitfuty, Tata Stee! Limited Varaneeens Parvatheesam K ‘Company Secretary Enct As Above .TA STEEL LIMITEDFitchRatings Fitch Downgrades Tata Steel and Tata Steel UK; Places on RWE Fitch Ratings-Singapore/Sydney-01 Apri 2016: Fitch Ratings nas downgraded Tata Stee Limited's (TSL) Long: Term Foreign Currency Issuer Default Rating (IDR) to "BB from ‘BB+/Siable’ and placed it on Rating Watch Evolving (RIE). Unsecured notes issued by TSL have also been downgraded to ‘BB from "BB and placed on RWE. The agency has also downgraded the Long-Term Foreign Currency IDR for TSL's wholly owned subsidiary, Tala Steel UK Holdings Limited (TSUKH), 10'S from '3+/Stable! and placed iton RWE. A fll Ist of rating actons is provided at the ond of this commentary. ‘The downgrade reflocts the dacine in TSL's proftabilty and jump in leverage during the financial year ending 31 Maren 2016 (FY16), folowing challenging market condiions for fs operations in India and overseas, especialy in the UK. The downgrade in TSUKH reflects the downgrade of is parent, TSL, and the weak operating envronment inthe UK and more broadly across Europe. ‘The RWE reflects uncertainty following TSL's announcement on 29 March 2016 that iis exploring all options for portfoo restructuring in Europe, including the potential divestment of its UK operations, in part or in whole Considerable uncertainty remains on timing and how the group and its debt willbe structured going forward. Fitch Deleves TSL's disposal of ts UK operations n part or whole, wil esultin a change to TSL's ratings KEY RATING DRIVERS ‘Weaker Profiabiliy in India; Profitabity of TSU’s Indian operations has been impacted by weak steel pice realisation in 8MFY16. Ils consolidated EBITDA per ton dectined to about INR7,400ronne (USD1101) in @MFY16. ‘com INR11400itin FY15, it by a INRZ, 50 alin real ation, Steel producers globally are sulfering from weak demand and overcapacity, with current global capactyutlisaton at alow last seen during the 2008 global financial crisis. In India, demane growin was a tepid 4.7% in 9MFY16, which was met largely by @ 29% yoy inoase in imports. Recent actions by the Indian government, such as the imposition ofa minimum import price folowing @ 20% Safeguard duty on impors to protect domestic manufacturers, have provided some rele, with domestic steel prices ring around INR¢,000Mt from January 2016 lows. However, prices are sill about 20% lower than the average for FY5. Fitch says increased competion among domestic producers to support utisaion rates wilely constrain further price hikes inthe near term. given domestic stel capacity is scheduled to jump about 15 millon tonnes over 2H'5 and 2016, European Operations Under Stress: TSL's overseas business reporled EBITDA losses consecutively in 20 and SQFY%6, ni by weak performance in the UK. lis operations in Europe and UK in particular, have faced poor steel ‘aw material spreads and relatively high operating costs. Price realsation in Europe has faced pressure from cheap Chinese and Russian imports amid weak regional demane. SL has taken steps to cut costs, including shutting down its plates business inthe UK and laying off around 3,000 employees. The company is als fecusing on value-added products and profitable market Segments, such {a8 the automotive sector, Recognising the need for further action, TSL is now exploring the sale of its UK Business, in part or who Jump in Leverage: Fitch estimates TSL's consolidated net debt to EBITDA leverage wil ump to 11.0xn FY, ‘rom 5.8x in the previous year, due to poor profitability. Leverage is Ixely to remain righ at 82x in FY17 and 5.7x by FYB. Fitch's forecast assumes a gradual improvement inrealsatons and a return to proftabilly for overseas ‘operations in FY18. Howover, further detalis on restructuring in Europe may change this forecast, Benefit From Greenfeld Plant: TSL is currenty commissioning the fist phase of its greenfield plant at Kalinganagar in Odisha, nda, wth a capacty of 3 milton tonnes por annum. TSL expocts to gradually Increase ‘output in FY17. Apart from increased sales, TSL would benef from improved praduct mac from the new plant, a ‘he plant wll speciale in producing high-grade fat products. wil alsa be one of the most cost-efficient pant in ‘the country. The bulk of the capex has been completed and TSL should begin deriving cash-low benef In FY. ‘TSUKH Gains from TSL Support TSUKH is unprofitable, wih a weak standalone crit profile. The business Continues to face weak local demand and high costs. However, TSUKH benef from strategic ts with ts parent, SL, sos IDR includes a two-notch uplit inline with Fitch's Parent and Subsidiary Linkage methodology. ‘Tata Group Support: SLs ratings also benefit from a ane-notch uplft because of potential support from the Tata Group due tothe formers strategic importance to tne group, KEY ASSUMPTIONS Fitch's key assumptions within our rating case forthe issuer include: + Sales volume to decline 8% in FY7 dus to lower steel production in he UK, Thereafter, volume assumed to ‘grow by around 6% annually, witha ramp up of Indian capacity. “Average sale realisation to improve 2% in FY17 and by 8% each over the next two years, = Consolidates operating ESITDA margin to improve to 9% in FY17 than to 11% in FY18 (FY16: 6%). EBITDA par tonne would bounce back over FY17-18 to FY1S lovol, Average annual capex of around INR7Obn trom FY,RATING SENSITIVITIES Tsu ‘The RWE willbe resolved folowing a review of TSL's credit profile ance Fitch has more clarity around the portfolio restructuring exercise in Europe, An upgrade is Ikely ifthe proceeds of potential asset sales are used to repay debi, reducing leverage. However, ifloverage increases due to significant closure costs forthe UK operations, Fitch will downgrade the rating ‘TSUKH ‘The RWE willbe resolved folowing a review of the linkages between TSUKH and TSL and TSUKH's credit profile, ‘once Fitch has more clanty around the portolo restructuring exercise in Europe. If Fitch concludes thatthe lnkage is ennanced or TSUKH's standalone profle improves, an upgrade in kel. A downgrade is likely i Fitch views tra the linkage has weakened, The fullist of rating actions follows: Tsu Long-Term Foreign Currency IDR downgraded to ‘BB from ‘BB; placed on RINE ‘Sonor unsecured rating: downgraded to'BB' from "BB; placod on RINE USDS00m 4.85% senior unsecured guarantoad notes due 2020 and USD tbn §.95% senior unsecured guaranteed notes due 2024 issued by ABJA investments Co Pte Lid, a wholly owned subsidiary of ‘SL: downgraded to "BB from "BB"; placed on RINE. ‘TSUKH Long-Term Foreign Currency IDR downgraded to’ from "Be: placed on RWE Conta: Prmary Analyst ‘Akash Gupta ‘Associate Director '$65 8796 7242 Fitch Ratings Singapore Pte Ltd 6 Temasek Boulevard 1495.08 Suntac Tower Four Singapore 038986 ‘Secondary AnalystMuralidnaran R Director +05 6796 7238 Committee Chairperson Vieky Melbourne ‘Senor Director 1981 2.8256 0325 Media Relations: Lasfe Tan, Singapore, Tel: +05 67 96 7234, Email: les. tan@ichratings.com; Leni Vu, Sydney, Tel: +61 2 8256 0304, Emaitleni w@litchratings.com. ‘Additonal information is avaiable on wrwifitehraings.com Applicable Criteria Corporate Rating Methodology - Including Short-Term Ratings ané Parent and Subsidiary Linkage (pub. 17 Aug 2015) (nips wwutchraings com/croditdeskireportsiroport_frame.clm? ‘pl id-8603628crt“ay 0eXAIOJKV 10iL CJhoGeiO\IUzITNJ9.yJloHAIOJEONTK tNDK2OTMsInNleSNpb25LZXKi01 “IVUNVNWike2RExLRFBKGWVQ20 UoyUEVCROSOSTNPW)VESONL QOxER|Baln0,GMV'X 1 OasNkIVotYRakuVBsySrV ‘JSQw_H1oWN}-gSNPs) Additional Disclosures DDod-Frank Rating Information Disclosure Form (huipsiww ftchratings.comicreddesk/press_releasesicontontidt_frame.clm? r_id=10018548ctt-ay0eXNIOUKV1GiLC JnbGciO\JIUzI NUS. oy loHAIO]EONTkINDKZOTMsInNeSNpb2SLZXKO_ UIVUIVNWIkzREXLRFSKWVG2CUoyUEVCROSOSTNPW)VESONL GOxER|Baln0.GMV1X 1 OasNkIVotYkakuVEsySrV JSQw_10W-gSNPs) ‘Solictation Status (htps Jw fichratings.com/gwsienidlsclosure/solictaton?pr_l¢=1001864) Endorsement Policy (nips ww fichraings.comiep/credtask/PolcyRegulaton faces context deta 1) ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS, PLEASE READ ‘THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP IFITCHRATINGS, COM/UNDERSTANDINGCREDITRATINGS {hupfchratings.comiunderstandingcreditratings). IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW-FITCHRATINGS.COM PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, ‘COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE"CODE OF CONDUCT SECTION OF THIS SITE, FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE ‘SERVICE TO THE RATED ENTITY ORITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE, Endorsement Policy -Filch's approach to raings endorsement so that ratings produced outside the EU may bo used by regulated entities within the EU for regulatory purposes, pursuant tothe terms of th respect to credit rating agencies, can be found an the EU Regulatory Disclosures (hlpsiw.ttenratings.comiregulatory) page, The endorsement status of al International ratings is provided within the entty summary page for each rated entity and inthe transaction deta pages forall structured fnance ‘tansactons on the Fiten website, These disclosures are Updated on a dally bass, Regulation with