Moody’s Investors Service Wednesday changed Tata Motors’ rating outlook to negative from stable, citing expectations of the weak operating performance of the company’s British arm Jaguar Land Rover (JLR).
The ratings agency has also affirmed the ‘corporate family rating’ and the company’s senior unsecured instruments ratings at Ba2, which is considered to be speculative grade and subject to substantial credit risk.
“The negative outlook reflects JLR’s weakening credit profile and the significant challenges in accomplishing a rapid turnaround amid heightened market risks and headwinds from rising input costs and fuel prices, as well as adverse impacts from the outcome of the Brexit negotiations,” Moody’s said in a statement.
Moody’s Vice President and Senior Credit Officer Kaustubh Chaubal said that the agency expected that the weak operating performance of JLR, will likely continue over at least the next 12-18 months.
The negative outlook also reflects the execution risks associated with JLR’s ability to achieve its announced cost and efficiency improvements, against its need to maintain high levels of investments towards reducing emissions and for its electrification strategy, it added.
Given the negative outlook, an upgrade in ratings within the next 12-18 months is less likely, Moody’s said.