Tata Motors Ltd's rating has been lowered by Moody's Investors Service from Ba2 to Ba3 citing long prone negative outlook. The downgrade in the ratings was because of the sustaining fall in the company's credit profile. Ba2 and Ba3 reflect the company's senior unsecured instruments rating.
Considering the losses the company is facing due to the fully owned subsidiary Jaguar Land Rover and the delay of the company in stabilising its free cash flow has resulted in the downgrade, explained Kaustubh Chaubal, Moody's Vice President and Senior Credit Officer.
Moody's reports state that the Tata Motors credit matrix was weaker than the credit rating company. The motor company had a debt of about 5.3 times the expected margins with about 0.9 per cent of adjusted Earnings before interest, tax, depreciation and amortization (EBITDA) margins.
As per Moody's analysis, the leverage of the company will remain five times, EBIDTA margins under 3 per cent and the cash flow will remain stagnant but negative for the next two years.
"The negative outlook on TML's ratings principally reflects the execution risks related to the timely turnaround of the company's operations amid a subdued operating environment, driven by rising competition," Chaubal told ANI.
The automobile sector is facing stagnancy due to overcapacity, taxations, tightening liquidity and shrinking dealer networks. The company had been under pressure because of the challenging Chinese market, a sudden shift towards electrification and the failure of diesel cars in Europe.
