Tata Motors placed on ratings watch
By INDIATIMES NEWS NETWORK |
MUMBAI: CRISIL has placed Tata Motors Ltd’s Rs.0.50 billion non-convertible debenture programme and Rs 40 billion cash credit facilities, both assigned AA+, on ‘Rating Watch with Negative Implications’. The ratings on the company’s Rs 30 billion short-term debt programme and Rs 20 billion non-fund based bank limits have been reaffirmed at ‘P1+’.
The rating action follows the announcement by Ford Motor Company that it is committed to focused negotiations with Tata Motors on the potential sale of its combined Jaguar and Land Rover business units.
This large acquisition, if successful, would give Tata Motors access to the luxury car segment, and to markets and technology that could benefit its automotive business over the long run. However, if it involves a high level of debt, the transaction would have an adverse impact on Tata Motors’ financial risk profile over the short to medium term. It would also pose challenges to Tata Motors’ business risk profile, since a significant proportion of the consolidated revenues will be driven by the acquired businesses where Tata Motors has yet to build and demonstrate its capabilities.
CRISIL will take a final view on the rating once the sale is announced in favour of Tata Motors and details of the potential acquisition cost, future investments, and mode of funding, emerge. The deal is expected to be a complex one, and could encounter several obstacles; if it does not go ahead, CRISIL is likely to remove the ratings from watch and reaffirm them with a ‘Stable’ outlook.
CRISIL has also placed the Rs 15 billion long-term debentures and Rs 26.05 billion long-term bank loan facilities of Tata Motors Finance on ‘Rating Watch with Negative Implications’, while reaffirming its ‘P1+’ rating on the company’s Rs 10 billion short-term debt programme and Rs 5.25 billion short-term bank loan facility.
The rating watch is on account of a similar rating action on Tata Motors, its parent company. CRISIL’s ratings on TMFL are centrally based on its ratings on Tata Motors: they factor in Tata Motors’ majority ownership of TMFL, and TMFL’s strategic importance to Tata Motors.
The rating action follows the announcement by Ford Motor Company that it is committed to focused negotiations with Tata Motors on the potential sale of its combined Jaguar and Land Rover business units.
This large acquisition, if successful, would give Tata Motors access to the luxury car segment, and to markets and technology that could benefit its automotive business over the long run. However, if it involves a high level of debt, the transaction would have an adverse impact on Tata Motors’ financial risk profile over the short to medium term. It would also pose challenges to Tata Motors’ business risk profile, since a significant proportion of the consolidated revenues will be driven by the acquired businesses where Tata Motors has yet to build and demonstrate its capabilities.
CRISIL will take a final view on the rating once the sale is announced in favour of Tata Motors and details of the potential acquisition cost, future investments, and mode of funding, emerge. The deal is expected to be a complex one, and could encounter several obstacles; if it does not go ahead, CRISIL is likely to remove the ratings from watch and reaffirm them with a ‘Stable’ outlook.
CRISIL has also placed the Rs 15 billion long-term debentures and Rs 26.05 billion long-term bank loan facilities of Tata Motors Finance on ‘Rating Watch with Negative Implications’, while reaffirming its ‘P1+’ rating on the company’s Rs 10 billion short-term debt programme and Rs 5.25 billion short-term bank loan facility.
The rating watch is on account of a similar rating action on Tata Motors, its parent company. CRISIL’s ratings on TMFL are centrally based on its ratings on Tata Motors: they factor in Tata Motors’ majority ownership of TMFL, and TMFL’s strategic importance to Tata Motors.
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
ADVERTISEMENT
