Global ratings agency S&P today withdrew its investment grade, long term corporate credit rating of BBB- on Mahindra & Mahindra on the company’s request. In October 2015, rating agencies S&P and Moody’s had assigned investment grade, long term corporate credit ratings on M&M giving it options to borrow through international bonds with tenure ranging from 10-30 years at much lower rates.Earlier, the company’s options were limited to domestic borrowings and through ECBs of tenure of up to 5 years. S&P had affirmed ‘BBB-‘ on M&M before it withdrew the ratings.
It reflected S&P’s view of M&M’s good market positions in tractor and utility vehicle (UV) segments, strong financial ratios, and significant investments in group companies, which can be monetised in the event of stress, the ratings agency said in a statement. S&P, however, did not disclose reasons for the company seeking withdrawal of the ratings. Highlighting challenges faced by M&M, S&P said a lack of diversity with a high dependence on India, cyclicality in tractor business, increasing competition in UV segment, and sustained capital expenditure to support new product launches partly offset the strengths.
The ratings agency had also given a stable rating outlook on M&M at the time of withdrawal. It reflected “expectation that the company’s new product launches in the UV segment and a recovery in tractor demand will boost our adjusted ratio of funds from operations to debt to above 60 per cent from fiscal year 2018 onward”, S&P said.