Standard & Poor’s Ratings Services has upgraded long-term corporate credit rating of Tata Motors, the news reports said.
The credit rating agency has upgraded Tata Motors because it believes the company’s competitive position and cash flow stability has improved. S&P assessment of the company’s business risk profile is fair.
The automobile company’s significant risk profile reflects its expectations that the company’s ratio of consolidated debt to EBIDTA will be about 2.0x-2.5x next year.
The view is based on improving the operating performance of Jaguar Land Rover, which is a fully owned UK arm of Tata Motors.
Mr. Abhishek Dangra, S&P’s credit analyst said, “JLR, which accounted for about 60% of Tata Motors’ consolidated revenues and two-thirds of its EBIDTA in the fiscal year ended March 31, 2012, outperformed our expectations.”
Mr. Dangra also said, “Tata Motors’ dominant position in the growing Indian commercial vehicle market and JLR’s improving competitive position support the company’s business risk profile.“ He also said, "The improvement is attributable to a healthy volume growth, particularly in the emerging markets, strong demand for the Land Rover brand and the launch of Evoque, which S&P expects to be the best-selling model for JLR in 2013.
The business risk profile of JLR has improved to fair from weak.
However, S&P believes JLR still faces a challenge in repositioning its Jaguar brand in the technologically advanced and competitive luxury car market. It also views the intense competition and weaker competitive position of Tata Motors’ Indian passenger vehicle segment as a weakness.
Tata Motors is the largest automobile company. It is a leader in the commercial vehicles in each segment, and among the top three in passenger vehicles. The company has more than 55,000 employees and is also the world’s fourth largest truck and bus manufacturer.