CRISIL reaffirms ratings of Tata Motors
12 April 2006
| Rs. 0.50 Billion Non-Convertible Debenture Issue | AA+/Stable (Reaffirmed) |
| Rs. 1.85 Billion Non-Convertible Debenture Issue | AA+/Stable (Rating Withdrawn) |
| Rs. 1.42 Billion Non-Convertible Debenture Issue | AA+/Stable (Rating Withdrawn) |
| Rs. 12.00 Billion Short-Term Debt Programme | P1+ (Reaffirmed) |
With a wide product portfolio of more than 130 models, Tata Motors has a strong presence across the light and heavy vehicles segment. This enables it to benefit from a shift in demand towards Medium & Heavy Commercial Vehicles (M&HCV) for longer haulage and light commercial vehicles (LCV) for distribution from prominent transport nodes.
In the LCV segment, the continued success of '207 DI/307 DI', and its variants and the recent success of 'Tata ACE' in the high growth sub-four tonne category, have improved Tata Motors' market share to an estimated 59 per cent in 2005-06 (refers to financial year from April 1 to March 31) from 43 per cent in 2002-03. Further, transfer of technology and newer designs from its overseas acquisitions (namely Tata Daewoo CV Ltd.) have resulted in reduced time and cost of new product developments. CRISIL believes that Tata Motors will continue to retain its strong position in the domestic CV industry.
In the passenger vehicle segment, Tata Motors is amongst the top three players in the domestic passenger cars segment, with an estimated market share of 17 per cent. High demand for passenger cars, coupled with increased acceptance of its products, especially in the niche diesel segment, has resulted in strong volume growth for Tata Motors. In the midsize segment, its model 'Indigo' is currently the largest selling car.
Despite the company's success in the passenger car segment, the domestic car market remains extremely competitive, with new product launches expected to be made by all major car manufacturers. Unlike other players in this segment, Tata Motors does not have access to a ready suite of products. Tata Motors plans to launch a new platform in 2006-07, which will gradually replace the existing 'Indica' platform.
The ratings also reflect the company's strong financial profile. High volume growth due to the extended upcycle in the CV segment and steady growth in the passenger car division since 2002-03, have strengthened Tata Motors' financial profile; the company's top line registered an average growth of 25 per cent over the past four years, led by volume growth. In addition, strong cash accruals and equity infusions following partial conversion of the first FCCB issue and the exercise of warrants (attached with the 2001-02 rights issue), have strengthened the company's capital structure. CRISIL has treated a part of the FCCB ($100 million) as equity and the rest (aggregating to $400 million including the recent FCCB issue in March 2006) as debt on the books of Tata Motors.
