Crisil reaffirms ratings on M & M's debt programmes, bank facilities

Crisil on Thursday reaffirmed its AAA-stable and A1-plus ratings on the debt programmes and bank facilities of Mahindra and Mahindra (M & M) Ltd.

The ratings continue to reflect M & M's leadership in the Indian tractor industry and healthy market position in light commercial vehicles, it said. The ratings also factor in a strong financial risk profile, supported by a robust balance sheet with low leverage and high financial flexibility.

These strengths are partially offset by exposure to cyclicality inherent in the farm equipment (tractor) and automotive (auto) segments, exposure to risks pertaining to acquisitions and investments in subsidiaries and joint ventures, and decline in market share in the utility vehicle space over the last few years.

 

The outbreak of novel coronavirus (COVID-19) is expected to affect each of the major segments over the near-term -- both in terms of disruption of the supply chain and end-demand.

"Nevertheless, M & M's strong capital structure and liquidity position along with the benefit of diversification of its business profile supports its credit profile," said Crisil.

It combined the business and financial risk profiles of M & M and its ventures in the utility vehicles, commercial vehicles and farm equipment segments which are considered as its core businesses.

The company also has investments in subsidiaries in the agriculture, financial services, hospitality, aerospace, consulting services, defence, information technology, chemicals, energy, industrial equipment, logistics, real estate, retail, components and steel industries.

Crisil said these subsidiaries will receive support from M & M depending on their strategic importance to it and the extent of its shareholding and investment in them.

The company now moderately consolidates SsangYong Motors Ltd, M & M's subsidiary based in South Korea, given the limited financial support being extended to the entity. The subsidiary was earlier fully consolidated.