Uncertain pace of recovery in global auto demand may continue to weigh on Tata Motors, JLR: Moody's

Uncertain pace of recovery in global auto demand may continue to weigh on Tata Motors, JLR: Moody's

However, the ratings agency, while keeping a negative outlook on the two firms, said support from Tata Sons mitigates operational challenges at TML and kept rating at the same level as JLR - 'B1 negative'.

PTIUpdated: Friday, October 16, 2020, 10:49 PM IST
article-image
TATA Motors upcoming SUV Gravitas | Zigwheels.com

Moody's Investors Service on Friday said the uncertain pace of recovery in global auto demand will continue to weigh on Tata Motors Ltd (TML) and its wholly owned subsidiary Jaguar Land Rover Automotive Plc over the next 12-18 months.

However, the ratings agency, while keeping a negative outlook on the two firms, said support from Tata Sons mitigates operational challenges at TML and kept rating at the same level as JLR - 'B1 negative'.

It further said electrification and political developments pose further downside risk and will prolong recovery.

"We do not expect global auto shipments to recover to pre-pandemic levels until the middle of the decade, while further lockdowns, the transition to electric vehicles, emission compliance requirements and - for JLR - Brexit all pose further downside risk," Moody's Vice-President and Senior Credit Officer Tobias Wagner said in a statement.

Moody's said, "TML's underlying credit profile has deteriorated to a level weaker than JLR's but the ratings remain the same, thanks to a one-notch uplift to reflect likely support from parent Tata Sons Ltd in times of need." JLR's rating does not incorporate an uplift for likely support from parent TML due to the latter's weaker credit quality. Still, the subsidiary remains strategically important to both TML and Tata Sons, a credit positive for the rating, it added.

Stating that it expects that TML and JLR's financial metrics will remain in breach of rating downgrade triggers over the next 12-18 months, Moody's said it implies that "a sustained improvement in operations is required to maintain their current ratings".

For TML, a return in outlook to stable would require an improvement at JLR as the key contributor to consolidated credit metrics, along with a recovery in the profitability of TML's Indian operations, it added.

Moody's Vice-President and Senior Credit Officer Kaustubh Chaubal said TML's credit profile previously benefited from the different demand dynamics in its JLR and non-JLR segments but the pandemic has hurt demand across all major markets. The profitability and liquidity of its Indian operations also have weakened, he added.

RECENT STORIES

Titan Sees 20% Revenue Growth In April-June Despite Softening Of Purchase In Jewellery Division

Titan Sees 20% Revenue Growth In April-June Despite Softening Of Purchase In Jewellery Division

Anthem Biosciences To Launch ₹3,395 Crore IPO On July 14, Offer-For-Sale To Close On July 16

Anthem Biosciences To Launch ₹3,395 Crore IPO On July 14, Offer-For-Sale To Close On July 16

Ventive Hospitality And Marriott International Sign Deal For 7 New Hotels, Including Ultra-Luxury...

Ventive Hospitality And Marriott International Sign Deal For 7 New Hotels, Including Ultra-Luxury...

Gold Jumps ₹550 On Fresh Buying, Silver Stays Flat For Third Straight Session

Gold Jumps ₹550 On Fresh Buying, Silver Stays Flat For Third Straight Session

Canva Faces Temporary Outage In India; Users Report Of Issues With Saving and Editing Designs

Canva Faces Temporary Outage In India; Users Report Of Issues With Saving and Editing Designs