S&P revises Tata Motor's outlook to stable, from positive
Rating agency Standard & Poor's on Thursday revised its outlook to 'stable' from 'positive' on Tata Motors on expectation that the leverage of the owner of marquee brands Jaguar and Land Rover (JLR) would rise.
July 25, 2013 / 23:07 IST
Rating agency Standard & Poor's on Thursday revised its outlook to 'stable' from 'positive' on Tata Motors on expectation that the leverage of the owner of marquee brands Jaguar and Land Rover (JLR) would rise.
“The outlook revision to stable reflects our expectation that Tata Motors' leverage will rise," the global rating firm said in a statement. S&P's revision comes on the back of JLR raising capex in current fiscal for product development and capacity addition to about euro 2.8 billion per year from Euro 2 billion in the fiscal year ended March 2013. "This will result in higher-than-expected negative free operating cash flow," S&P said. However, stable outlook reflects S&P's expectation that growth at JLR and a mild recovery in India operations would help Tata Motors maintain its financial performance in line with the rating agency's expectations, despite a significant increase in capital investments by JLR.S&P also affirmed its 'BB' long-term corporate credit rating on the automaker and 'BB' long-term issue ratings on the company's senior unsecured notes. BB rating indicates that the issuer is less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions. The rating agency expects JLR to contribute more than two-thirds of Tata Motors' revenues and about 80 percent of EBITDA in fiscal 2014, because of continuing growth at JLR and Tata Motors' weak performance in India. "Tata Motors' India automotive operations performance has weakened because of poor demand. JLR's performance in fiscal 2013 was strong with healthy sales and stable EBITDA margin; we had expected its margin to decline," it said. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
