Moody’s Investor Service has recently changed stance to the ratings of Tata Motor Limited’s Corporate Family Rating (CFR) and the Company’s Senior Unsecured instruments to negative from under review status.
According to Moody, TML’s credit profile aligns with a B2 rating. But considering the financial support CFR can get from Tata Sons Limited, B1 rating has been given.
Moody’s Vice President and Senior Credit Officer, Kaustubh Chaubal said, “The downgrade reflects the sustained deterioration in TML’s credit profile and our expectation that it will take longer than we had previously expected for the company’s credit metrics to return to levels appropriate for a Ba3 CFR”.
Also, he said that the pandemic situation has increased the pressure on the company’s cash flows and that it is likely to result in a prolonged period of weak credit metrics. He said, “We expect the company’s adjusted EBITA margin to remain negative in the fiscal year ending in March 2021, while its adjusted debt/EBITDA will stay above 10.0x.”
Tata Motors has said that it has a net debt of Rs 48,000 crore as of 31 March. Moody said that JLR (Jaguar Land Rover) is weakly positioned at a B1 negative rating as a pandemic is likely to affect its performance in FY21, leading to negative free cash flow. It added that CAPEX reduction and cost-saving programs would result in cash burn reduction. Tata Motors Limited is planning to save Rs 6,000 crore to deleverage its balance sheets.