Rating agency Standard & Poor's today upped the credit rating of automaker Tata Motors by a notch, after the company issued equity worth $750 million.
Standard & Poor's Ratings Services raised Tata Motors' long-term corporate credit rating to 'BB-' from 'B+' and assigned a stable outlook, according to a statement by the rating firm.
"We raised the rating on Tata Motors to reflect the improvement in the company's capital structure following the recent equity issuance of $750 million (Rs 3,351 crore). We believe that the equity issuance also improves the company's financial flexibility," S&P said.
Earlier this month, a committee of board of directors in a meeting decided to issue and allot 32,165,000 ‘A´ ordinary shares at a price of Rs 764 per share and 83,20,300 scrips at a price of Rs 1,064 per share aggregating to a total issue size of Rs 3,351 crore.
As on October 4, Tata Motors increased the size of its institutional share sale to $750 million from $525 million.
The company had increased the amount to be raised through qualified institutional placements (QIPs) on good response to the offer.
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S&P added that its expects Tata Motors to largely maintain its improved operating performance.
"India operations remain robust and stable given the company's dominant position in the commercial vehicle segment and increasing sales in the passenger car segment. Sales at Jaguar Land Rover's (JLR) operations have also increased due to better demand across most regions, particularly the UK, China, and North America," S&P's credit analyst Mehul Sukkawala said.
The stable outlook reflects our expectation that the company will sustain its improved operating performance and its improved capital structure, it added.