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Fitch Ratings has revised the Outlook on Jaguar Land Rover Automotive PLC's (JLR), subsidiary of Tata Motors, outlook to "Positive" from "stable" on continued strong operational performance.
The agency has also affirmed JLR's Long-Term Foreign-Currency Issuer Default Ratings (IDRs) and senior unsecured debt rating at 'BB-'.
The change in outlook reflects Fitch's expectation that the company will maintain its robust financial profile. This is despite a period of heavy investment in its transition to become a higher volume premium manufacturer.
The positive outlook indicates that an upgrade could occur over the next 24 months if JLR continues to maintain its profitability, generate positive free cash flow (FCF) and increase its breadth and volume of products, FITCH said in statement today.
The successful execution of the Jaguar XE compact sedan model is seen as a key part of this.
It expects JLR's sales and profitability to continue to be robust in the financial year ending 31 March 2015 (FY15) and FY16, supported by a strong product pipeline and healthy global demand for premium vehicles.
"We expect JLR to maintain margins above eight per cent in FY15-16 despite increased costs associated with elevated capex and heightened competition", it said.
Retail volumes in FY14 rose 16 per cent from the previous year on strong sales of the Range Rover Evoque, New Range Rover Sport and the Jaguar XJ, XF and F-Type.
A richer product and geographic mix contributed to the increase in the EBIT margin to 11.7 per cent from 10.8 per cent in FY13, Fitch added
