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Fitch downgrades SAIL to BB, with negative outlook

Fitch Ratings has downgraded 'slong-term foreign-currency issuer default rating to BB from BBB- with anegative outlook, following the deterioration in the company's financialprofile after a prolonged slump in international steel prices.

SAIL's debt-funded CapEx program has magnified the impact ofweak steel prices, the rating agency said April 1. The India state-owned steel majoralso reversed to an EBITDA loss of 25.3 billion Indian rupees in the ninemonths to Dec. 31, 2015, down from 36.8 billion rupees in EBITDA a yearearlier, due to low steel prices, competition from steel imports to India andmuted steel demand in the country.

Fitch expects continued weakness in SAIL's financial profilefor the next 18 months, with moderate improvement towards the end of thefinancial year to March 31, 2018.

"Indian steel demand is likely to improve over themedium term, which will support better profitability at SAIL," the ratingagency said, adding that this will help reduce the company's net leverage tobelow 4.5x after fiscal 2018.

Fitch also concluded a negative outlook for the company amidrisks of further weakening in steel prices, increases in Indian steel importsand weaker-than-expected steel demand over the next 12 to 18 months, making itdifficult for SAIL to improve its profitability and thus its leverage.

As of April 1, US$1was equivalent to 66.36 Indian rupees.