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MOTORINDIA
l August 2012
Standard & Poor’s Ratings Services has raised its
long-term corporate credit rating on Tata Motors Ltd. to
‘BB’ from ‘BB-’. The outlook is positive. At the same
time, the issue ratings on the company’s senior unse-
cured notes have been raised to ‘BB’ from ‘BB-’.
Said Standard & Poor’s credit analyst Abhishek Dan-
gra: “We upgraded Tata Motors because we believe the
company’s competitive position and cash flow stability
have improved. We assess the company’s business risk
profile as “fair”. Tata Motors’ ‘significant’ financial risk
profile reflects our expectation that the company’s ratio
of consolidated debt to EBITDA will be about 2.0x-2.5x
in 2013. Our view is based on the improved operating
performance of Jaguar Land Rover PLC (JLR; BB-/
Positive/--), which is Tata Motors’ fully owned U.K.
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. We expect JLR to sus-
tain the improvement in its operating performance. Tata
Motors’ dominant position in the growing Indian com-
mercial vehicle market and JLR’s improving competi-
tive position support the company’s business risk pro-
file”.
JLR’s business risk profile improved to “fair” from
“weak”. The improvement is attributable to healthy vol-
ume growth, particularly in emerging markets, strong
demand for the Land Rover brand, and the launch of
Evoque, which is expected to be the best selling model
for JLR in 2013. However, JLR still faces a challenge
in repositioning its Jaguar brand in the technologically
advanced and competitive luxury car market. “We also
view the intense competition and weaker competitive
position of Tata Motors’ Indian passenger vehicle seg-
ment as a weakness”, he said.
“The positive outlook reflects our expectation that
Tata Motors will sustain its operating performance and
maintain its debt protection measures, despite an in-
crease in engineering and product development expend-
iture at JLR,” added Mr. Dangra.
Tata Motors may be upgraded if JLR’s business risk
profile continues to improve, including a successful po-
sitioning of Jaguar; or Tata Motors funds its increased
capital development expenditure largely through inter-
nal sources, such that its ratio of consolidated debt to
EBITDA falls below 2.5x on a sustained basis.
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