By IANS
New Delhi : After Moody’s, it was the turn of another ratings agency, Standard and Poor’s (S&P), to warn Tata Motors Ltd of a ratings downgrade following talks with Ford to buy two iconic British auto brands Jaguar and Land Rover.
“Tata Motors’ acquisition of Ford’s luxury units could potentially have negative impact on corporate credit rating on the company, especially if it is heavily funded by debt,” S&P said in a statement.
“This would be a large-scale acquisition for Tata Motors that could potentially have negative impact on the corporate credit ratings on the company, especially if it is heavily funded by debt,” said S&P’s credit analyst Anshukant Taneja.
Tata Motors was placed on credit watch with negative implications on the “BB+” long-term corporate credit ratings, as well as “BB+” foreign currency rating on all its rated debt issues.
S&P noted that both parties were entering a period of more focused and detailed talks and that the acquisition had to cross several milestones with no binding agreement as yet.
“Before resolving the CreditWatch placement, S&P would assess the financing structure of this potential acquisition and its impact on Tata Motors’ financial risk profile.”
Last week, another global ratings agency Moody’s said it has placed Tata Motors on review for a possible downgrade should the US carmakers Ford give it the go-ahead to take over Jaguar and Land Rover.
Tata Motors enjoys a strong position in the low-to-mid-end vehicle segments in India and some developing markets, but the acquisitions will expose it to luxury product category and broader geographies where it lacks experience, it said.
Tata Motors emerged as the frontrunner in the race for the British luxury brands Thursday when owners Ford said it was focussing on talks with the $28-billion Tata group, India’s largest industrial house with 98 companies in its stable.