Tata Motors Rating Downgraded by Moody's on Jaguar Land Rover Woes
Moody's Investor Services has downgraded Tata Motors rating to Ba2 with a stable outlook. Earlier, the agency had a Ba1 rating on the company.
In this file photo, a Tata Steel sign is seen outside the Tata steelworks near Rotherham, Britain, March 30, 2016. (Photo: Reuters/Phil Noble)
Global rating agency Moody's has downgraded the corporate family rating on Tata Motors due to the weakening credit metrics at Jaguar Land Rover (JLR). Moody's Investor Services has downgraded Tata Motors rating to Ba2 with a stable outlook. Earlier, the agency had a Ba1 rating on the company.
"The downgrade to Ba2 reflects our expectation of continued weakness in Tata Motors consolidated credit metrics over the next two years, led by its wholly-owned subsidiary JLR Automotive Plc," Moody's Vice President and Senior Credit Officer Kaustubh Chaubal said in a statement.
Although JLR accounted for 48 per cent of Tata Motors Ltd (TML) group’s unit sales in 2017-18, it generated 78 per cent and 76 per cent respectively of the company's reported consolidated revenues and earnings before interest, tax, depreciation and amortisation (EBITDA) for the automotive business, Moody's said.
"Given this large contribution, weakening credit metrics at JLR have a direct and immediate impact on TML's consolidated results," it added. Moody's said that TML's consolidated adjusted debt/EBITDA is likely to remain elevated over the 12-18 months.
At the same time, large capital and product development expenditure at JLR of GBP4.5 billion annually will keep free cash flows negative, it added.
"Moreover, Moody's also expects that rising commodity prices and a challenging operating environment for JLR will keep TML's EBITDA margins below 3 per cent," the rating agency said.
Meanwhile TML's ex-JLR operations, in particular the India business, will continue to improve on the back of favourable industry dynamics, the company's upcoming product launches and focus on cost rationalisation measures, it added.
Recommended For You
- Payal Rohatgi Files Complaint Against Ajaz Khan Over Derogatory Video
- I Hope I Can Get Gold: PV Sindhu Doesn't Want to Miss Opportunity After Reaching 1st Final of 2019
- Perry Continues to Fly the Flag for Women’s Cricket with Ashes Heroics
- Sophie Turner, Joe Jonas Give the Biggest Shout-out to Priyanka Chopra Jonas on Her Birthday
- WWE Star Triple H Has a Special Gift for the Cricket World Cup Winning Team England