HOME > BUSINESS > AUTO > Fitch Ratings upgrades Tata Motors on improving business performance

Fitch Ratings upgrades Tata Motors on improving business performance

JLR contributes most of the company’s profits

Fitch Ratings has upgraded its rating on Tata Motors by one notch, pointing to the automaker’s improving business performance.

“The upgrade reflects the sustained improvement in TML’s Indian automotive business over the last two years, supported by growing commercial vehicle volumes, successful new product launches in the passenger vehicle segment, as well as the management’s renewed focus on meeting medium-term capital needs in its Indian operations via internally generated funds,” the ratings agency said.

“We expect TML will continue to grow its India business and capture more market share over the medium-term,” it added.

Tata Motor’s unit Jaguar Land Rover Automotive’s strong credit profile also contributed to the upgrade, Fitch added.

JLR accounted for close to 85% of its parent’s operating profit in the fiscal year ended on 31 March 2016.

The ratings provided by agencies like Fitch are used by banks and other lenders to evaluate the creditworthiness of companies who take loans from them.

Tata Motors’s default rating has now been increased to ‘BB+’ from ‘BB’ with a ‘stable’ outlook. In comparison, Fiat Chrysler Automobiles N.V. is rated BB-.

INDIA RECOVERY

Fitch noted that Tata Motors was getting more traction in India’s car market.

“TML’s renewed focus on passenger vehicles in the last two years has translated into successful launches in the segment. For example, the launch of the Tata Tiago in April 2016 drove double-digit volume growth in TML’s passenger-vehicle segment for 9M FY17.”

However, the company’s commercial-vehicle division’s reported more muted volume growth of about 1% over the same period (FY16: 3%) as the Indian government’s demonetisation of large notes at the end of 2016 took a toll on demand.

“We expect demand for commercial vehicles to improve in the next 12-18 months supported by improving economic activity. TML’s Medium & Heavy Commercial Vehicle business has historically been a strong performer, and boasts a domestic market share of more than 50%,” it said.

India operations will continue to see sustained volume growth, but EBITDA margin will remain at around 3%-4% because of intense competition in passenger vehicles, and rising raw material and marketing costs, the agency predicted.

JLR GROWTH

JLR reported strong volume growth of 17% yoy in 9MFY17, underpinned by strong contribution from the new Jaguar F-PACE, which offset the decline in the Land Rover Discovery and discontinuation of the Land Rover Defender over the same period.

“We expect JLR’s Land Rover products – mainly luxury SUVs – to continue to benefit from robust demand in both developed and developing markets. JLR’s launch of the new Jaguar XE and F-PACE fill in important gaps in JLR’s product portfolio. JLR’s strategy to target high-end customers with premium products resulted in higher EBITDA margin than its rating peers, who have a higher mix of mass-market offerings.”

Fitch said it expects JLR to continue to report volume growth of about 7%-8% over FY17-FY20 and EBITDA margin to stabilise at around 14% due to increasing economies of scale as volumes grow.

INVESTING FOR GROWTH

Fitch said it expects Tata Motors to invest around 3.2 billion pounds in JLR in FY17 to fund capacity expansion, engine manufacturing, vehicle architecture and new technologies to meet carbon emission requirements.

The investments include a new manufacturing facility for JLR in Slovakia with an initial capacity of 150,000 units that is targeted for completion by 2018.

“These are likely to contribute to negative free cash flow in FY17, despite improving cash flows from operations. TML will also have about Rs 40 billion of annual capex for its Indian business, mainly for new launches of passenger vehicles.

“We expect TML’s financial profile to remain strong over the medium term in spite of the high capex, supported by improving operating cash flows and the INR74.3 billion rights issue in FY16. We expect TML’s leverage (net adjusted debt/EBITDAR) to remain around 1.0x over the medium term,” it said.

OUTLOOK

Fitch said it does not expect any positive rating action in the medium term as it takes time for the group to increase scale to a level that is similar with its global peers.

Positive rating action may result if the company materially increases the volume and breadth of its products, while maintaining profitability and a strong financial profile, it added. 

Follow ULTRA.news
RCom ‘respectfully disagrees’ with Fitch and Moody’s on its credit rating Anil Ambani-led Reliance Communications said it disagrees with the decision of agencies Moody's and Fitch to downgrade the company's credit rating based on its 'standstill agreement' with its lenders.Shares of RCom fell 4% to Rs 19.30 on the National Stock Exchange today ...
Tata Motors domestic car sales up 27% in May, CV sales down 13% Tata Motors said it saw a 4% decline in its total passenger and commercial vehicle sales volumes in May 2017.Total number of vehicles sold (including exports) in the month was 38,361.The company’s domestic sales fell 3% to 34,461 nos.However, sales of domestic passeng...
RCom formally assures lenders it will pay Rs 25,000 cr in four months Anil Ambani Group's telecom arm Reliance Communications said it has 'formally' communicated to its lenders that it will pay an amount of Rs 25,000 cr to them on or before Sept 30.The latest statement from the telecom operator comes as a way of reassuring investors and lenders...
RCom says looking to refinance various payments till September Anil Ambani Group's Reliance Communications said it was in talks with its lenders and partners to put off some of the instalment payments that the company had to pay until the completion of its merger with Sistema Shyam Teleservices and Aircel Cellular by September this year....
Fitch cuts IDBI Bank rating as NPAs climb to 21% Fitch Ratings said it downgraded IDBI Bank's Long-Term Default Rating and its 'viability rating' by one notch each to 'BB+' and 'ccc' with a stable outlook."IDBI Bank's Viability Rating reflects the deterioration of its financial profile in the last two years and our expectat...
Tata Motors global wholesale down 4% in April; cars up The Tata Motors Group global wholesales in April 2017, including Jaguar Land Rover, were at 73,691 nos., lower by 4%, over April 2016, the automaker said.Within this, commercial vehicle wholesales including Tata Daewoo were at 18,844, lower by 36%, over April 2016.Global...
US Fed unlikely to reverse quantitative easing this year: HDFC Securities US Federal Reserve BuildingBroking and financial firm HDFC Securities Ltd said it does not expect the US Federal Reserve to start sucking out the liquidity that it has infused into the global financial market in the last nine years any time soon.The comments came in the ...
Rs 1.7 lakh cr deposited via demonetization may not be withdrawn – SBI Monthly cash withdrawals for all banks | source:SBI ResearchThe Indian banking system is likely to get a permanent liquidity boost of Rs 1.7 lakh cr due to the demonetization of high-denomination bank notes, State Bank of India chief economic adviser said in a note to bank c...
PNB, Corp Bank most aggressive in going after big debtors; SBI, BoB more relaxed Punjab National Bank, the third largest public sector bank in India, and smaller cousin Corporation Bank can teach bigger siblings like State Bank of India and Bank of Baroda a thing or two about going after big loan defaulters, an analysis of Reserve Bank of India data shows. ...
Jaguar Land Rover reports strong February 2017 sales Tata Motors reported its best ever sales performance for its UK unit for the month of February in 2017, with total retail sales up 9.3% on year for the month.Jaguar Land Rover, one of the world's top manufacturers of luxury vehicles, sold of 40,978 vehicles in the month, th...
Fitch downgrades Anil Ambani’s Reliance Communications over Aircel merger Fitch Ratings has downgraded India-based Reliance Communications Limited's long-term rating to 'B+' from 'BB-'."It is our view that Rcom's plans to demerge its wireless business into a 50:50 joint-venture and sell 51% of its tower business, Reliance Infratel Ltd (Infratel), w...
Fitch revises US growth estimates on Trump election, says protectionism to rise The surge in populism and anti-establishment sentiment witnessed in the Brexit vote and Donald Trump's victory in the US presidential election seem likely to push structural policies in the direction of economic nationalism, said Fitch Ratings in its latest global economic outloo...
Despite Demonetization, India will beat China in GDP growth: Fitch Ratings Despite a moderation in India's GDP growth rate in the short term due to cash crunch, the Indian economy will still grow faster than that of China, global ratings agency Fitch said."We still expect India’s GDP growth to trend higher than China’s in the medium term," said the ...
Fitch says demonetization gains may not last Fitch Ratings said the positive effects are unlikely to be strong and sufficiently enduring "to support credit profiles" and will impact GDP growth in the current quarter.Though the gains will be substantial in the short-term, they may not last as people may still go back...
No Income Tax on FCCB proceeds, SC rules on RCom The Supreme Court on Monday dismissed the petition filed by the Income-Tax Department against Reliance Communications on taxing of the proceeds of Foreign Currency Convertible Bonds (FCCBs), said the telecom operator.The Supreme Court order has quashed contingent tax liabilit...
Jaguar Land Rover sales up 11% in October Tata Motors' subsidiary Jaguar Land Rover reported its best-ever October retail sales of 46,325 vehicles, up 11% compared to October 2015."The month’s performance has been driven by strong sales of the Land Rover Discovery Sport, Range Rover Evoque, Jaguar XF and the introduc...
NPA Crunch: Lypsa Gems repays Rs 7.5 cr to Bank of India, sets an example Lypsa Gems and Jewellery Ltd said it reduced its secured debt by 25% by repaying a loan of Rs 75 mn to Bank of India.As of today, its debt stands at Rs 235 mn, down from Rs 31O mn as of 31st March 2016, it said. Debt Equity Ratio has dropped from 1.03x to 0.75x.Lypsa is...
Brickworks downgrades Indian Overseas Bank bonds Credit Rating agency Brickwork Ratings India Pvt Ltd. downgraded bonds issued by Indian Overseas Bank from A- to BBB+.It maintained its outlook on the bonds as negative.The downgrade has come in the context of rising bad loans on the bank´s balance sheet.Indian ...
Yes Bank to raise up to Rs 2500cr via private placement of debentures Yes Bank said it will raise up to Rs 2500 crore by way of debentures.This will comprise Rs 1,000 crore of unsecured redeemable long-term bonds and a green shoe option for an additional Rs 1,500 crores.The bonds will be sold via private placement.The bank had earlier ...
Ahead of spectrum auction, industry group warns of rising telecom debt Even as the telecom industry finds itself in a tariff war with entry of a major player, an ASSOCHAM-KPMG paper has pointed towards the operators grappling with a huge debt burden of Rs 3.80 lakh crore, reinforcing a case for rationalisation of taxes and other levies along with sp...
HUDCO raises Rs 1300 cr through private placement of bonds Housing & Urban Development Corporation Ltd., a wholly owned Govt. of India enterprise, said it raised a sum of Rs 1300 crore through debt.The amount was raised through placement issues of unsecured, redeemable and non-convertible bonds.While the issue of Rs 700 crore...
Tata Motors’ JLR credit rating upgraded by Moody’s Tata Motors said Moody´s Investors Service has upgraded the credit rating of its unit Jaguar Land Rover Automotive Plc. by one notch.The company´s overall family corporate rating has been moved from Ba2 to Ba1. Outlook remains positive.The Jaguar Lannd Rover is Tata Motor...
Mahindra & Mahindra raises Rs 475 cr via debentures Automobile manufacturers Mahindra & Mahindra Ltd. said it raised Rs 475 crores via non-convertible debentures on private placement basis with a tenure of 10 years.The face value of the 7.57% debentures are Rs 10,00,000 each.Mahindra & Mahindra is an Indian multina...
M&M seen holding SUV, tractor market share despite rising competition- CRISIL Mahindra & Mahindra Ltd is likely to maintain its market position in its core SUV and tractor markets despite the entry of new competitors, ratings company Crisil said."Cost-efficient operations, development skills, broad product portfolio, and increased production ca...
Jaguar launches second generation Jaguar XF sedan in India at Rs 49.5 lakhs Jaguar Land Rover India launched the new Jaguar XF sedan in five variants starting from ₹ 49.50 lakh (ex-Delhi) in Mumbai.The new Jaguar XF is powered by the new Ingenium 2.0 l 4-cylinder turbocharged diesel engine that delivers a power output of 132 kWand is upto 20 kg l...