New Delhi: Tata Motors’ Rs7,500 crore rights issue is credit positive as it will cut its debt and fund business growth.
This was revealed by ratings agency Moody’s. The ratings agency further said that equity injection would also reduce the need for TML to take out cash from its subsidiary, Jaguar Land Rover (JLR). Tata Motors’ rights issue should therefore reduce the risk of diverting JLR’s own financial resources to its owner, which is positive given also its own expansion plans that will require higher capital expenditure, Moody’s said.
Moody’s Vice President – Senior Credit Officer, Alan Greene said in a statement, “The reduced leverage positions TML (Tata Motors Ltd) firmly within its rating, and could pave the way for upward rating pressure on the back of a clear turnaround in its Indian business.” JLR has been paying a dividend of 150 million pounds to Tata Motors Holdings Ltd (TMHL) that goes to TML and has helped the Indian auto maker offset its standalone losses from operations and post a small net profit.
