Fitch downgrades
Tata Motors’ rating
Fitch Ratings has downgraded the long-term issuer default rating (IDR) of Tata Motors Ltd. (TML) to ‘BB-’ from ‘BB.’ “The outlook is negative,” Fitch ratings said in a statement. “The downgrade reflects the reduction in Fitch’s expectations for TML’s profitability and free cash generation in the next two to three years, it said. Fitch said it revised its estimates as business risks had increased for the company both its India operations and its fully owned U.K.-based subsidiary, Jaguar Land Rover Automotive Plc. while TML is likely to invest to bolster its long-term competitiveness.
“This will result in sustained deterioration in TML’s financial profile, including its leverage. The rating action follows a similar action on JLR’s rating on July 16, 2019. Fitch rates TML on a consolidated basis including 100% of JLR, considering its ability to access cash at JLR despite weak legal and operational ties,” it said.
It added, “the negative outlook reflects limited rating headroom, given our expectation of elevated leverage on a consolidated basis, and risk of further deterioration in TML’s profitability and leverage. Uncertainty around an orderly outcome of Brexit negotiations and the evolving global tariffs situation pose risks, in particular to TML’s JLR business, which faces a significant level of production-sales mismatch due to concentration of its production base in the U.K.”
“JLR’s heavy reliance on the sales of diesel variants exposes it to unfavourable regulations in Europe. JLR plans to offer electric variants for all of its models by 2020, but unexpected delays could dampen sales performance. We expect India’s auto sales volumes to stabilise gradually with the re-election of the government in May 2019, but prolonged weakness in sales would exert further pressure on leverage,” Fitch Ratings said.
