Tata Motors shares declined nearly 3 percent intraday on June 21 after global rating agency Moody's downgraded credit rating on the weak performance of its British subsidiary Jaguar Land Rover.
The stock was one of biggest losers among auto stocks in last one year, falling 49 percent amid JLR worries and slowdown in Indian business. It was quoting at Rs 157, down Rs 2.15, or 1.35 percent on the BSE at 1130 hours.
Moody's Investors Service downgraded corporate family rating and Tata Motors' senior unsecured instruments rating to Ba3 from Ba2 with a negative outlook.
"The downgrades reflect sustained deterioration in Tata Motors' credit profile, with weaker than anticipated credit metrics--led by the weak performance of JLR," Kaustubh Chaubal, a vice president and senior credit officer at Moody's said in a note.
The agency expects it will take longer than previously anticipated for JLR to improve its free cash flows to the positive territory.
In the case of the parent Tata Motors, the specific triggers for the downgrade are the high debt levels (where its debt to operating profit ratio has gone to 5.3 times) and operating margins dipping to 0.9 percent, the agency said.
The agency also downgraded corporate family rating and JLR's bonds rating to B1 from Ba3 with negative outlook.
Kaustubh said JLR's leverage will remain elevated and free cash flow negative for fiscal years 2020 and 2021 as it seeks to turnaround performance in China, executes its restructuring programme and continues to invest in its product development, including electrification, another vice-president Tobias Wagner said.
JLR faces many other challenges, including persistent weakness in diesel car sales in Europe and Britain, and the business shift towards electric, hybrid and full electric vehicle, he added.
Illustrating JLR's importance to the company's fortunes, the agency said the British subsidiary accounted for only 48 percent of unit sales in FY19, but delivered 75 percent of revenue and 24 percent of operating profit. It also accounted for 63 percent of the consolidated debt.(With inputs from PTI)