Mumbai: Moody’s Investor Service on Wednesday assigned a B1 instrument rating to Tata Motors Ltd-owned Jaguar Land Rover Automotive Plc’s (JLR) new unsecured notes worth 500 million euros that are due for payment in 2024.
“The new notes rank pari passu with the existing unsecured financial indebtedness of the company, which continues to represent the vast majority of the company's debt capital structure. The notes are unsecured but benefit from guarantees of the principal operating subsidiaries," the ratings agency said in a statement today.
Earlier, JLR’s parent Tata Motors Ltd (TML) had reported loss of ₹217 crore for the September 2019 quarter, narrowing down the same from ₹1,049 crore year-on-year (YoY) on JLR’s recovery in China, which is British luxury carmaker’s largest market globally.
TML’s consolidated financial statements reported JLR’s Q2 revenues at ₹53,066 crore as against ₹51,951 crore for the year-ago period, thereby recording a 2% YoY growth. It’s EBIDTA (earnings before interest, taxes, depreciation and amortization) margin stood at 13.8% (against 9% in Q2FY19), which the company said was amongst the highest in the last 16 quarters. JLR accounted for about 81% of Tata Motors’ operational revenues in Q2FY20.
JLR’s Q2FY20 retail sales stood at 128,953 units, down 0.7% YoY. Mint had last month reported that JLR’s performance could have been worse but for a recovery in China, where its retail sales grew 24.3% YoY. Meanwhile, its retails in Europe remained flat at 0.9%, followed by declining numbers in the USA (-1.0%), UK (-5.1%) and in other overseas markets (-19.2%).
“As a result, Moody's-adjusted debt / EBITDA has reduced for the first time in several quarters to 8.9x on a last twelve months basis, down from 10.6x as of fiscal year-end March 2019," the statement said.
While the rating agency views management’s efforts of turning around JLR’s business in China as a big positive, it continues to remain cautious on the carmaker’s performance in FY20 and FY21 on weak market conditions and continued R&D investments in new technologies such as electrification.
However, Moody’s positively views the sizeable reduction in negative free cash flow to –GBP64 million in Q2FY20 as against –GBP623 million in Q2FY19.
“JLR may also pursue additional funding options that may lead to further increases in debt," Moody’s said in a statement today.
On 25 October, TML had said that its board had approved raising ₹3,500 crore via external commercial borrowing for refinancing its existing debts. This was in addition to the equity injection of ₹6,500 crore from Tata Sons in return of the preferential allotment of equity shares and convertible warrants to its promoters.
In its filing to the stock exchange last week, TML said that it plans to raise $300 million through unsecured offshore debt financing where the bonds will bear a coupon rate of 5.875% and will mature in 2025. On 12 November, Moody’s had allotted Ba3 rating to the proposed senior unsecured notes to be issued by Tata Motors Ltd (TML) with a negative outlook.