Motherson Sumi Systems fell 3.02% to Rs 93.15 after the credit rating agency Moody's Investors Service lowered the outlook on the company's rating to negative from ratings under review.
Moody's, however, confirmed Ba1 corporate family rating (CFR) for the auto component firm.
Kaustubh Chaubal, Moody's vice president and senior credit officer, said: The confirmation of Motherson's rating reflects our view that while the challenges brought by the coronavirus pandemic will keep the company's credit profile weak in the fiscal year ending March 2021 (fiscal 2021), its financial metrics should start to recover the following year."
However, even with a recovery, Motherson's leverage and profitability will stay weak for its Ba1 CFR, reflected in the negative outlook. The negative outlook also reflects weak liquidity and the company's upcoming refinancing tasks under more challenging market conditions.
"The negative outlook indicates the risk of a downgrade if the global auto industry does not recover, with a slower-than-anticipated recovery in the company's financial metrics", Chaubal added.
Given the current market situation, an upgrade of the ratings to investment-grade is unlikely in the near term. However, the outlook could change to stable if Motherson's credit metrics recover to pre-outbreak levels as a result of improvements in the market situation, though timely refinancing of the company's scheduled debt maturities is a prerequisite for such outlook stabilization, the ratings agency said.
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The auto component maker reported 55.3% decline in consolidated net profit to Rs 183.38 crore on 12.1% fall in net sales to Rs 14870.32 crore in Q4 March 2020 over Q4 March 2019.
Motherson Sumi Systems is one of the world's leading specialised automotive component manufacturing companies for original equipment manufacturers.
While the large-cap stock is currently trading below its 200-day simple moving average (SMA) placed at 108.03, it is currently trading above its 50-day placed at 91.65 and its 100-day SMA placed at 86.84.
On a year-to-date (YTD) basis, shares of Motherson Sumi have fallen 36.44% while the S&P BSE 100 index and the S&P BSE Auto index have declined 12.77% and 15.49%, respectively.
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