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S&P lowers Tata Motors rating over JLR's weaker-than-expected profitability

JLR has been hit hard due to trade tensions between China and the United States, low demand for diesel cars in Europe and worries over Brexit

Chris Thomas | Reuters 

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Global Ratings on Tuesday lowered the credit rating of Indian automaker Ltd and its luxury car unit Automotive Plc (JLR), citing weaker-than-expected profitability at JLR.

JLR has been hit hard due to trade tensions between and the United States, low demand for diesel in and worries over Brexit.

cut its rating on Tata Motors' issuer credit and senior unsecured notes to 'BB-' from 'BB'. The ratings remain on negative watch, reflecting the uncertainties for JLR from a fast-approaching Brexit deadline, said.

JLR's higher presence in the UK exposes it to the fallout of a potential "no-deal" Brexit which could further diminish the likelihood of a turnaround for the company, the rating firm added.

S&P also expects Tata Motors' leverage to deteriorate over the next 12-18 months, given its ongoing cash losses at JLR despite turnaround plans for the unit.

ALSO READ: Tata Motors shares falls after JLR announces temporary job cuts at UK plant

In October, logged a loss for the second quarter, and revealed a turnaround drive for JLR which included cost cuts and plans to improve cash flows by 2.5 billion pounds over 18 months.

ALSO READ: Tata Motors plans large-scale overhaul of its sales network in next 1 year

S&P, which considers the company's cost cut target to be aggressive, forecasts that "JLR will have significant negative free operating cash flows over the next two years, resulting in weak financial ratios for "

First Published: Tue, December 04 2018. 19:45 IST
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