S&P upgrades Tata Motors on improved cash flow

Our Bureau New Delhi | Updated on March 12, 2018

Standard & Poor's Ratings Services has upgraded its long-term corporate credit rating of Tata Motors.

S&P said it upgraded Tata Motors because it believes the company's competitive position and cash flow stability have improved.

S&P assessment of the company's business risk profile is ‘fair’. Tata Motors' significant financial risk profile reflects its expectation that the company's ratio of consolidated debt to EBITDA will be about 2.0x-2.5x next year.

JLR performance

The view is based on the improved operating performance of Jaguar Land Rover, which is Tata Motors' fully owned UK subsidiary.

“JLR, which accounted for about 60 per cent of Tata Motors' consolidated revenues and two-thirds of its EBITDA in the fiscal year ended March 31, 2012, outperformed our expectations.”

S&P expects JLR to sustain the improvement in its operating performance.

Tata Motors' dominant position in the growing Indian commercial vehicle market and JLR's improving competitive position support the company's business risk profile, said Mr Abhishek Dangra, S&P’s credit analyst.

JLR's business risk profile has improved to ‘fair’ from ‘weak’.

The improvement is attributable to a healthy volume growth, particularly in emerging markets, strong demand for the Land Rover brand and the launch of Evoque, which S&P expects to be the best-selling model for JLR in 2013, he said.

However, S&P believes JLR still faces a challenge in repositioning its Jaguar brand in the technologically advanced and competitive luxury car market.

It also views the intense competition and weaker competitive position of Tata Motors' Indian passenger vehicle segment as a weakness.

Tata Motors' liquidity is seen as ‘adequate’.

It expects the company's ratio of liquidity sources to liquidity uses to be well above 1.2x in the next 12-24 months.

“The positive outlook reflects our expectation that Tata Motors will sustain its operating performance and maintain its debt protection measures, despite an increase in engineering and product development expenditure at JLR,” Mr Dangra said.


Published on July 09, 2012

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