Pace of recovery in auto demand may continue to weigh on Tata Motors: Moody's

  • According to the rating agency, Tata's underlying credit profile has deteriorated to a level weaker than Jaguar Land Rover's.
File photo: Tata Motors logos are seen at their showroom in Mumbai. (REUTERS)
File photo: Tata Motors logos are seen at their showroom in Mumbai.

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'.

Also check these Vehicles

Find more Cars
Land Rover Range Rover (HT Auto photo)
Engine Icon4395 cc FuelType IconMultiple
₹ 2.39 - 4.17 Cr
Compare
View Offers
Land Rover Defender (HT Auto photo)
Engine Icon2996.0 cc FuelType IconMultiple
₹93.55 Lakhs - 2.30 Cr
Compare
View Offers
Land Rover Discovery (HT Auto photo)
Engine Icon2996.0 cc FuelType IconMultiple
₹88.06 Lakhs - 1.20 Cr
Compare
View Offers
Land Rover Range Rover Velar (HT Auto photo)
Engine Icon1998 cc FuelType IconMultiple
₹ 93 Lakhs
Compare
View Offers
Land Rover Range Rover Sport (HT Auto photo)
Engine Icon2993.0 cc FuelType IconMultiple
₹ 1.64 - 1.84 Cr
Compare
View Offers
Land Rover Range Rover Evoque (HT Auto photo)
Engine Icon1998.0 cc FuelType IconMultiple
₹ 64.12 - 66.60 Lakhs
Compare
View Offers

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.

First Published Date: 16 Oct 2020, 15:53 PM IST
NEXT ARTICLE BEGINS

Please provide your details to get Personalized Offers on

Choose city
+91 | Choose city
Choose city
Choose city

Want to get the best price for your existing car?

Powered by: Spinny Logo
By clicking "View Offers" you Agree to our Terms and Privacy Policy

Dear Name

Please verify your mobile number.

+91 | Choose city
Couldn't verify the OTP.
It's either expired or it's incorrect.