Fitch affirms Tata Motors at BB+; outlook stable

PTI Mumbai | Updated on April 27, 2018 Published on April 27, 2018

International rating agency Fitch today affirmed the ratings on the country’s largest automaker by revenue, Tata Motors, at BB+ with a stable outlook.

The ratings, which includes a one-notch uplift from its standalone rating of ‘BB’ on its linkage with Tata Sons Limited (TSOL), reflects its leading position in the domestic commercial-vehicle market and the passenger-vehicle business, which is recovering after the success of new product launches in recent years, Fitch said a statement.

The rating also reflects the strong positioning of its 100 per cent-owned subsidiary Jaguar Land Rover, which has a rating of BB+/stable outlook, in the premium segment and a strong financial profile. JLR’s operating profit accounted for over 85 per cent of Tata Motors’ consolidated operating profit in fiscal year 2017.

“The stable outlook reflects our expectations of a gradual improvement in the profitability and strong financial flexibility, which will help meet significant investment requirements, especially in JLR, without any liquidity concerns and support the company’s leverage at a level commensurate with the current rating,” the agency said.

Improving domestic performance

Fitch has cited the improving domestic business as one of the major reasons for the rating as pointed to the leading position of the company in the domestic commercial-vehicle segment after product launches that addressed portfolio gaps.

The company’s volume grew by 9 per cent year on year in medium and heavy commercial vehicles and 23 per cent in light commercial vehicles in FY18. The overall market share rose to 47.5 per cent as of December 2017 from 44.4 per cent as of March 2017, according to the industry lobby, Society of Indian Automobile Manufacturers, data.

“We expect CV demand to remain healthy in the next 12–18 months, supported by an improving economy and government plans to ramp up infrastructure outlays,” Fitch said.

On its car business, the report said, the company’s strategy to increase presence in different sub-segments has helped it regain some of its lost market share which rose to 6.2 per cent as of December 2017 from 5.2 per cent as of March 2017 as volume gained 21 per cent in FY18. Its volume in the growing SUV market surged more than 150 per cent in FY18 thanks to the Nexon and Hexa.

Published on April 27, 2018

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