Moody’s on Wednesday revised its outlook on Tata Motors (TML) to negative from stable given the continuing weak performance of its passenger vehicles subsidiary JLR — Jaguar Land Rover — and the firm’s two consecutive quarters of losses.
A day earlier, Moody’s had downgraded JLR to Ba3 negative from Ba2 stable due to deteriorating credit and operating profiles. While retaining its Ba2 ratings for the Indian car manufacturer, the agency noted an upgrade is unlikely in the next 12-18 months.
Given the company’s non-JLR operations now account for half the company’s consolidated EBITDA, Moody’s estimates TML’s consolidated leverage was around 4.3x, at the end of September, in contrast to JLR’s adjusted debt/EBITDA of 4.8x. At the end of March, 2018, Tata Motors’ consolidated total borrowings were Rs 88,950 crore and the company’s interest bill in 2017-18 was Rs 4,681 crore.
While JLR has chalked out a cost-cutting and efficiency plans which could potentially result in savings of £2.5 billion in the next 18 months, Moody’s cautions that the impact of the plan will not kick in the second half of the current financial year.