Standard & Poor's Ratings Services revised its outlook on Tata Motors Ltd. to positive from negative. At the same time, Standard & Poor's affirmed the 'B' long-term corporate credit rating and the issue rating on the company's senior unsecured notes.
The outlook revision reflects the consistent improvement in the operating performance of Jaguar and Land Rover (JLR) over the past two quarters. This has been supported by Tata Motors' strong performance at its India operations and the focus on effectively managing debt levels as well as improving its liquidity position.
Tata Motors' consolidated operating performance has improved markedly in the past two quarters. JLR's strength has been led by higher sales and better prices as the global economic environment improved and new versions of existing vehicle models were launched.
"In addition to the improvement at JLR, revenues from Tata Motors' India operations have risen strongly from the beginning of 2009, helped by strong domestic economic growth, the launch of new products or new versions of existing products and dominant market position in commercial vehicles market," said Standard & Poor's credit analyst Manuel Guerena.
Standard & Poor's currently expects Tata Motors to continue improving its operating performance, led by the turnaround in JLR and strong operating performance at its India operations, but that is partly offset by higher commodity prices and competition.
"Tata Motors' financial risk profile has improved but it continues to be highly leveraged," Guerena said. "We expect the company to continue its focus on effectively managing its debt levels through various strategic measures such as divestments."