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Tata Motors skids after Moody's downgrades rating

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Tata Motors fell 1.85% to Rs 156.20 at 9:45 IST on the BSE after Moody's Investors Service downgraded its credit rating on the company.

The announcement was made after market hours yesterday, 20 June 2019.

Meanwhile, the S&P BSE Sensex was down by 189.72 points, or 0.48% to 39,411.91.

On the BSE, 2.43 lakh shares were traded in the counter so far compared with average daily volumes of 11.62 lakh shares in the past two weeks. The stock had hit a high of Rs 157.75 and a low of Rs 154.55 so far during the day. It hit a 52-week high of Rs 308.90 on 22 June 2018 and a 52-week low of Rs 141.90 on 8 February 2019.

Moody's Investors Service has downgraded Tata Motors' corporate family rating (CFR) and the company's senior unsecured instruments rating to Ba3 from Ba2. The outlook remains negative.

"The downgrade reflects the sustained deterioration in Tata Motors' credit profile, with weaker than anticipated credit metrics -- led by the weak performance of its 100% owned subsidiary Jaguar Land Rover -- and our expectation that it will take longer than we had previously expected for the company's free cash flows to return to positive territory," said Kaustubh Chaubal, a Moody's Vice President and Senior Credit Officer.

Moody's also downgraded the corporate family rating (CFR) of Jaguar Land Rover Automotive Plc (JLR) to B1 from Ba3 and the probability of default rating (PDR) to B1-PD from Ba3-PD. Concurrently, Moody's has also downgraded the instrument ratings on the bonds to B1 from Ba3. The outlook remains negative.

"The downgrade reflects Moody's expectation that leverage will remain elevated and free cash flow negative for fiscal years 2020 and 2021 as Jaguar Land Rover seeks to turn around performance in China, executes its restructuring program and continues to invest in its future model line-up including electrification", said Tobias Wagner, vice-president and senior analyst at Moody's. "The negative outlook further reflects the challenge to turn around financial performance in a subdued market environment and as other manufacturers also prepare to launch electric vehicles. Risks regarding a potential "no-deal Brexit" or potential US tariffs also remain."

On a consolidated basis, Tata Motors's net profit fell 45.8 % to Rs 1665.03 crore on a 3.7 % fall in the net sales to Rs 85676.33 crore in Q4 March 2019 over Q4 March 2018.

Tata Motors is a global automobile manufacturing company.

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First Published: Fri, June 21 2019. 09:49 IST