International rating agency Fitch affirmed the ratings on the country's largest automaker by revenue, Tata Motors, at BB+ with a stable outlook. The ratings, which includes a one-notch uplift from its standalone rating of 'BB' on its linkage with Tata Sons Limited (TSOL), reflects its leading position in the domestic commercial-vehicle market and the passenger-vehicle business, which is recovering after the success of new product launches in recent years, Fitch said a statement.
The rating also reflects the strong positioning of its 100 percent-owned subsidiary Jaguar Land Rover, which has a rating of BB+/stable outlook, in the premium segment and a strong financial profile. JLR's operating profit accounted for over 85 percent of Tata Motors' consolidated operating profit in the fiscal year 2017.
"The stable outlook reflects our expectations of a gradual improvement in the profitability and strong financial flexibility, which will help meet significant investment requirements, especially in JLR, without any liquidity concerns and support the company's leverage at a level commensurate with the current rating," the agency said.
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Fitch has cited the improving domestic business as one of the major reasons for the rating as pointed to the leading position of the company in the domestic commercial-vehicle segment after product launches that addressed portfolio gaps. Its volume grew by 9 percent year on year in medium and heavy commercial vehicles and 23 percent in light commercial vehicles in FY18. The overall market share rose to 47.5 percent as of December 2017 from 44.4 percent as of March 2017, according to the industry lobby, Society of Indian Automobile Manufacturers, data.
"We expect CV demand to remain healthy in the next 12 -18 months, supported by an improving economy and government plans to ramp up infrastructure outlays," Fitch said.
On its car business, the report said, the company's strategy to increase presence in different sub-segments has helped it regain some of its lost market share which rose to 6.2 percent as of December 2017 from 5.2 percent as of March 2017 as volume gained 21 percent in FY18. Its volume in the growing SUV market surged more than 150 percent in FY18 thanks to the Nexon and Hexa.
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