TML’s domestic operations and its business in key global auto markets, which are served through its UK-based subsidiary Jaguar Land Rover Automotive, are bound to take a hit.
As a response to company- and sector-specific events, rating agencies
follow a trajectory for rating action. Starting with keeping the rating on ‘watch’, they follow with changing outlook, and finally the rating (upgrade/downgrade/reaffirmation).
The effect this time has been severe as the coronavirus
pandemic has disrupted businesses everywhere. The hospitality sector
has been hit hard by a demand slump. CARE Ratings revised the outlook for Tata-owned Indian Hotels Company from “stable” to “negative”. The ‘negative’ outlook is on account of disruption in operations.
Most of the company’s properties have been either shut or are operating at minimal level. CARE expects occupancy rates and revenues per room to substantially decline in FY21. Disruption could also lead to increase in working capital requirement, which may impact liquidity position, CARE added.
ICRA affirmed “A+” rating for TajGVK Hotels & Resorts’ long-term loans and “A1+” for short-term loans. However, it revised outlook on rating from “stable” to “negative”. TajGVK has approached lenders for moratorium on loan repayments. India Ratings has placed Phoenix Mills’ Long-Term Issuer Rating of ‘IND A+’ on Rating Watch Negative (RWN). It reflects business disruptions caused by the temporary closure of malls.
This has also elevated near-term downside risks for economic growth and discretionary consumption.
Second-order effect, such as currency depreciation, may also impact credit profile of companies.
Those with international borrowings will be adversely impacted.
Moody’s, in a review of high-yield companies
in South and South-East Asia, said depreciation of the Indonesian rupiah and the rupee has increased risks for companies
with currency mismatch and heavy reliance on US dollar debt.