Global rating agency Moody’s has downgraded the rating of automobile company Tata Motors. The agency has reduced the company’s corporate family rating (CFR) and senior unsecured instruments rating by one notch to B1. Moody’s said that Tata Motors’ rating could have dropped further and this could be reduced to B2 as well. But it is expected that Tata Sons will come forward to help and that is the reason also why its rating has not been reduced too much.

The company’s rating was being monitored since 26 March. The outlook on all ratings has been changed to ‘negative’ from ratings under review,” Moody’s Investors Service said in a statement. There is a lot of pressure on the debt profile of Tata Motors. Moody’s Senior Credit Officer and Vice President Kaustubh Chaubal said, “The drop in ratings shows how much Tata Motors’ credit profile has deteriorated and we believe that it may take a longer time than before for the company’s ratings to reach Ba3.“

Chaubal said that the epidemic has weakened Tata Motors’ cash flow and due to this the calculation of the company’s debt will remain impaired for a long time. Even prior to the COVID-19 outbreak, the company’s credit profile was under pressure due to lower auto sales and falling demand in key markets. He also predicted that the company’s EBIDTA margin could be negative in FY 2020-21.

Moody’s investor service said that the negative outlook shows that the company has many challenges ahead and dangers of the decline of it. This can be seen until FY 2021-22. The company may insist on restructuring the Indian auto market and JLR by this year so that the situation can improve.

Information Source:https://www.moodys.com/research/Moodys-downgrades-Tata-Motors-to-B1-changes-outlook-to-negative–PR_426215