ICRA has reaffirmed the 'AA' rating to Rs 4.35 billion term loans and Rs 700 million fund based bank limits of Tata Sponge Iron. The outlook on the long term rating is stable. ICRA has also reaffirmed the 'A1+' rating to Rs. 2.22 billion non-fund based bank limits of TSIL. 

ICRA notes that TSIL is exposed to significant project related risks; given that it has large capital expenditure plans relative to its current balance sheet size, and the fact that any major time or cost overrun may adversely impact its financial performance going forward.

ICRA also expects some weakening in the capital structure of the company over the medium term on account of the debt to be contracted in order to fund the planned capital expenditure of around Rs 15 billion. The project related risks have been accentuated further by the uncertainties surrounding TSIL's coal mining project along with two other companies.

The Ministry of Coal, vide a recent letter to TSIL has communicated its acceptance of the de-allocation of the coal block as recommended by the Inter Ministerial Group. However, TSIL has legally challenged this, the final outcome of which is awaited. ICRA would continue to monitor developments in this regard.

In ICRA's opinion, if the final verdict is in the favour of TSIL, the extent of value addition in TSIL's operations would significantly increase, and its operating profile would further improve on the back of higher control over raw materials, which is likely to enhance its cost efficiency further and favourably impact the profitability of operations. 

Shares of the company gained Rs 4.05, or 0.88%, to settle at Rs 464. The total volume of shares traded was 86,585 at the BSE (Friday).