Tata Motors shares dip nearly 4% after Fitch downgrades rating

Shares of Tata Motors Ltd (TML) fell nearly 4 per cent in intra-day trade on the Bombay Stock Exchange (BSE) on Wednesday after global rating agency Fitch downgraded the auto major's rating to BB- from BB with a negative outlook.

Weighed down by rating downgrade, Tata Motors share price declined as much as 3.71 per cent to touch an intra-day low of Rs 150.40 apiece on the Bombay Stock Exchange (BSE) after making a flat opening at Rs 156.60.The stock closed day's trade at Rs 151.25 apiece, down 3.17 per cent.

On the National Stock Exchange, Tata Motors share ended at Rs 151.30 apiece, down 3.14 per cent as compared to previous closing price of Rs 150.50. The stock opened flat at Rs 156.35 and touched an intra-day low of Rs 150.50 in the early trade.

"The downgrade reflects the reduction in Fitch's expectations for Tata Motors' profitability and free cash generation in the next two to three years," it said. The rating agency revised estimates citing increase in business risks in both its India operations and its fully owned UK-based subsidiary, Jaguar Land Rover Automotive plc.

According to Fitch, the negative outlook reflects limited rating headroom, given its expectation of elevated leverage on a consolidated basis, and risk of further deterioration in TML's profitability and leverage. "Uncertainty around an orderly outcome of Brexit negotiations and the evolving global tariffs situation pose risks, in particular to TML's JLR business, which faces a significant level of production-sales mismatch due to concentration of its production base in the UK."

The auto major is scheduled to announce its June quarter earnings later in the day, and analysts expect the weakness in consumer demand to impact its  top and bottom-line growth.

Growth trends in monthly sales volume of passenger and commercial vehicles in India have worsened after turning negative in December 2018 due to constrained liquidity at non-bank lenders and excess capacity caused by relaxation of axle load standards for commercial vehicles.

Edited by Chitranjan Kumar

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