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S&P reaffirms B+ Rating for Tata Motors

Auto News - Published on Wed, 14 Aug 2019

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Global rating agency S&P has reaffirmed Tata Motors' long-term issuer and issue credit ratings to "B+" and kept the outlook negative due to high cash burn at its British arm Jaguar Land Rover and geopolitical risks. S&P said in a report that "The negative outlook reflects Tata Motors' vulnerability to continued cash burn at Jaguar Land Rover Automotive (JLR), further risks from uncertainties on Brexit and trade tensions, as well as India's automotive market slowdown.”

The rating agency has removed the ratings from "CreditWatch", saying that geopolitical risks such as Brexit and US tariffs could take longer than expected to play out.

According to S&P, Tata Motors' continued cash burn largely at its UK-based subsidiary JLR is denting the company's financial position. In addition, the agency is unsure of the timing and outcome of significant events such as Brexit and US trade tariffs, it said.

Tata Motors' first-quarter fiscal 2020 performance remained weak, with JLR volumes down 11.6% across markets and India commercial vehicle (CV) volumes 14.8% lower, it added.

The agency expects Tata Motors' cash flow to stay negative at least over the next two years, largely driven by volume recovery from JLR's new product launches, stabilizing Chinese markets, and 800 million pounds of budgeted cost cuts under project charge.

S&P said that "An expectation of volume growth in its Indian market, which hinges on late recovery of monsoon and overall shift to new emission norms, should also aid the recovery.”

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Posted By : Mohan Sharma on Wed, 14 Aug 2019
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