NMDC Steel Ltd. saw its shares increase by almost 2% in Friday's trade following an announcement that Crisil Ratings had upgraded the company's long-term bank facilities. The rating moved to 'Crisil A/Stable' from the previous 'Crisil BBB+/Stable', signaling a positive outlook for the steel manufacturer.
Rating Upgrade Driven by Operational Stability
Crisil's decision to upgrade NMDC Steel's rating is primarily attributed to a significant improvement in both its business and financial risk profiles. This enhancement is a direct result of the successful stabilization and ramp-up of the company's 3 million tonne per annum (MTPA) integrated steel plant located in Nagarnar, Chhattisgarh.
Stronger Operating Performance in FY26
The company's operating performance showed substantial improvement in fiscal year 2026. Key factors contributing to this positive trend include:
- Higher Capacity Utilisation: The Nagarnar plant's capacity utilisation surged to 80% in FY26, a notable increase from 50% in FY25. This indicates a successful resolution of initial operational bottlenecks and efficient stabilization of operations.
- Enhanced Operating Efficiency: Improved efficiency across operations contributed significantly to the company's performance.
- Robust Domestic Steel Demand: A healthy demand for steel within the domestic market provided a supportive environment for growth.
These improvements collectively led to a 60% growth in operating income during FY26. Furthermore, the operating profit before depreciation, interest, and tax (OPBDIT) reached approximately 11% in FY26, a significant turnaround from operating losses recorded in the previous two fiscal years. This was supported by an enhanced product mix, including specialized grades, optimized raw material usage, and a higher scale of operations.
Improved Financial Health and Liquidity
NMDC Steel's financial risk profile has also strengthened in conjunction with its operational improvements. The adjusted interest coverage ratio improved to around 3.1 times in FY26, a positive shift from a negative ratio in FY25. Crisil expects this ratio to remain stable between 3-4 times in the medium term, supported by consistent operating performance, planned debt repayments, and the absence of major capital expenditure plans.
The company's liquidity position is robust, backed by cash and equivalents totaling Rs 800 crore as of March 31, 2026. Additionally, the average fund-based bank limit utilization stood at 75% during the 12 months ending April 30, 2026.
Government Support and Industry Cyclicality
The rating continues to benefit from the inherent support NMDC Steel receives as a Government of India (GoI) entity, specifically through its parent company, NMDC Ltd. The Ministry of Steel has also mandated NMDC to provide necessary backing to NSL until its eventual divestment by the government.
Despite these strengths, Crisil noted that moderate debt protection metrics and the inherent cyclicality of the steel industry partially offset the positive factors, presenting ongoing considerations for the company.