Tata Motors: Icra downgrades various instruments to AA-

Rating agency Icra on Monday downgraded non-convertible debenture programme, long-term loans, long-term fund-based facilities and long-term non-fund-based facilities to (Icra) AA- (negative) from (Icra) AA (negative).

While short-term debt programme, commercial paper programme and short-term non-fund-based facilities have been reaffirmed at (Icra) A1+. Data from Bloomberg showed that, total debt of Tata Motors stood at `1.06 lakh crore as on March 2019. The revision in the rating reflects the continued deterioration in the financial profile of Jaguar Land Rover PLC (JLR), Tata Motors’ (TML) wholly-owned subsidiary, amid headwinds in China and Europe (including the UK) markets.

“Brexit related uncertainty is expected to continue to pressurise JLR’s sales volumes, going forward. These near-term pressures could result in a further weakening of JLR’s sales volumes and thus profitability,” said Icra in its report.

In its rating rationale the rating agency said, “The ratings continue to reflect the management’s commitment to deleveraging the balance sheet by rationalising its investments and costs in JLR as also divesting some of its non-core investments and trimming overall working capital cycle. The benefits of these initiatives have yet to flow in. TML’s credit profile continues to benefit from being part of the Tata Group, comfortable capital structure and strong liquidity position, aided by large cash and liquid investments.”

The stock of Tata Motors on Monday ended the day at `123.75, down by 5.25% or `6.85 – its lowest since November 2009. The negative outlook reflects Icra’s expectations of a further deterioration in the credit profile of TML, primarily due to weakening of JLR’s credit metrics amid rising pressures on its sales volumes.

“The ratings may be downgraded if there is further weakening of JLR’s performance or weakening of performance at TML standalone level. The outlook may be revised to ‘Stable’ if the credit profile of TML improves due to turnaround of JLR operations against a backdrop of improved operating leverage at TML (standalone) and deleveraging measures to be undertaken by the management,” said Icra.

Tata Motors