New Delhi: Standard & Poor’s has downgraded the credit rating of India’s top vehicle company Tata Motors days after it launched the world’s cheapest car, the Nano.
The downgrade, putting Tata Motors deeper into “junk debt” territory, highlights the view that the Nano will contribute little to profits soon despite hopes it will one day revolutionise travel for millions of people.
The move, announced by the global ratings agency late on Wednesday, came after the glitzy launch of the sporty four-door car, which will retail for Rs100,000 or about $2,000.
The company said it did not comment on credit rating changes.
S&P analyst Manuel Guerena cited “a material deterioration” in cash flow, a difficult operating environment and high debt for cutting Tata’s rating to B+ from BB-.
Nano’s launch has come at a tough time for Tata, which has been hit by a slowing domestic economy and the deepening world financial crisis that has hurt sales of the British luxury marques Jaguar and Land Rover it bought last year.
The company is still working to refinance the $2 billion outstanding from a $3 billion loan it took to pay for those acquisitions.
Bankers have said the bridge loan issue must be resolved by early June.
“We’re in discussions on different options. The (existing) bridge loan is available until 1 June and we will take a decision at an appropriate time,” a Tata Motors’ spokesman said.