Rating Rationale

Key Rating Drivers & Detailed Description

Strengths:

Strategic importance of AMNS India to its sponsors: The acquisition has provided the sponsors (world’s leading steel manufacturers) direct access to the Indian steel industry, where they had limited presence earlier. Strategic importance is also highlighted by the top management of the sponsors forming part of AMNS India’s board of directors, upfront equity infusion of around Rs 25,041 crores (post-merger with ArcelorMittal India Pvt Ltd [AMIPL]) for working capital and ongoing capex requirement; and back-ended repayment structure, which will ensure adequate liquidity. Apart from the financial support extended, AMNS India also benefits from both the sponsors on operations management, raw material procurement and technical know-how among other aspects. AMNS India’s strategic importance underlines strong probability of support from its sponsors in future, if needed. Any change in the overall support philosophy of the sponsors will be a key rating sensitivity factor. Further, sponsors have also demonstrated a strong parent support philosophy wherein the external debt raised by the holding company (AMNSL; a 60:40 JV of AMSA and NSC) for acquisition of AMNS India is guaranteed by the sponsors in proportion to their holding in the JV.

Established market position in the domestic steel industry: AMNS India is the fourth largest domestic flat steel manufacturer with installed crude steelmaking capacity of 8.8 MTPA, after Steel Authority of India Ltd (SAIL), Tata Steel Ltd (TSL) and JSW Steel Ltd (JSW). AMNS India also has a full range of downstream products capacities at Hazira and Gandhidham (Gujarat), Khopoli and Pune (Maharashtra), catering to customers across automobile, white goods, construction, energy, and other sectors. AMNS India’s steel plant is strategically located in the western region in proximity to key demand centres. Furthermore, the company is undertaking capex to increase Hazira’s steelmaking capacity to 15 MT, and to reach steel-making capacity of up to 40 MT over the long term, which will further strengthen its market position.
Vertically integrated operations and high raw material linkages: The company has strong backward integration through captive sources and long-term contracts in all key raw materials, such as iron ore, natural gas, coal, and power. The iron ore requirements are met through captive operating mines of 12.7 MTPA (Thakurani with 5.5 MTPA and Sagasahi with 7.2 MTPA) and long-term agreement with NMDC Ltd (rated ‘Crisil AAA/Stable/Crisil A1+’) for 8 MTPA. Similarly, for gas, the company has long-term contracts with GAIL India Ltd, Shell India Pvt Ltd and other globally renowned suppliers for meeting the requirements till calendar year 2030, significant exposure of which has been hedged till calendar year 2026 (around two-third hedged for calendar year 2027-30). The coal requirements are largely met through a long-term contract with Balta GMBH and other global players, while the power requirements are met through captive power plants (Bhander Power Ltd for 500 MW, multi-fuel power plant at Hazira for 270 MW, AM Green for 250 MW [renewable power] and Essar Power Odisha Ltd for 60 MW), power purchase agreements with other power generators and through energy exchanges. Additionally, the company acquired Essar Power Transmission Company Ltd in 2024. The company is working towards further strengthening its raw material security through acquisition of mines, and long-term contracts with key players. This will provide more stability in production as well as reduce the volatility in the cost of production. However, with upcoming capacities and increasing scale of operations, availability of adequate raw material linkages will remain monitorable.

Healthy liquidity and strong financial flexibility supporting financial risk profile: Crisil Ratings estimates that the company’s debt metrics have materially moderated in fiscal 2025 (considering total debt, of which ~75% is parent debt) against 2.52 times in fiscal 2024 on account of moderation in operating profitability with continued progress on the ongoing planned capex. However, the same is expected to be temporary and the capital structure should witness improvement from the current fiscal with expectation of improvement in Ebitda. Also, the financial risk profile is mainly supported by the nature of debt, which is largely from the parent (forming ~75% of the current debt) with favourable repayment terms (majority principal repayment beginning from fiscal 2030) as well as available flexibility to AMNS India, in case needed. AMNS India also has healthy liquidity with cash and equivalents of around Rs 5,575 crore as on May 31, 2025, which, along with expected improvement in annual cash accrual, will be largely adequate for supporting equity requirement towards capex and working capital requirements of the company. Crisil Ratings has noted that AMNS India intends to keep minimum unencumbered liquidity in the form of cash, fixed deposit, liquid mutual funds of USD 0.6-0.8 billion and the same will be monitorable.

Weaknesses:

Susceptibility to volatility in key raw material prices and cyclicality associated with the steel industry: The inherent cyclicality in the steel industry exposes steelmakers to a high degree of volatility in operating margins and, in turn, to debt protection metrics. In fiscal 2025, the margin was impacted given the moderation in realisation due to higher low-cost imports as well as unfavourable raw material price movements. Also, temporary restrictions on import of met coke had also impacted the margin to an extent. Furthermore, demand for steel is sensitive to trends in key end-user industries, such as automobiles, infrastructure, construction and consumer durables. However, AMNS India’s backward integration in raw materials and integrated operations is likely to offset the sharp volatility in profitability. Any significant variation in demand and pricing scenario will remain monitorable. AMNS India is also exposed to regulatory risk given its presence in the highly regulated iron ore mining.

Exposure to risks related to large capex and acquisitions: AMNS India has capex plan of Rs 55,000-60,000 crore over fiscals 2026-28, for completion of the ongoing projects, debottlenecking and expansion of upstream and downstream facility, along with acquisition of ancillary assets. The major capex will be towards increasing the steel manufacturing capacity in Hazira, up to 15 MTPA from 8.6 MTPA. Additionally, the company also has long-term capex for setting up 20 MTPA greenfield steel manufacturing unit in the eastern coast of India. Crisil Ratings understands that land acquisition process for the same has commenced and the company is looking to set up an initial capacity of 7.3 MTPA. Notably, the capex funding required for expanding the capacity till 15 MTPA on the west coast has been arranged already from domestic and international sources.

These large capex plans entail project execution risks and are exposed to time and cost overruns since the projects are of long gestation period. However, this is offset by the extensive experience, strong technical expertise and past track record of project execution by the sponsors in the steel industry. The capex is expected to be funded largely from existing liquidity, annual cash accrual and unutilised credit lines from the parent. However, the deficit (if any) is likely to be funded by a suitable mix of debt and accruals. Any delay or cost overruns in the capex would hinder the expected improvement in the scale of operations and will remain monitorable. Also, for the acquired assets, while synergy benefits are expected to accrue, the extent and sustainability of the same will remain monitorable.