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Fitch Ratings downgrades Future Retail, Tata Motors; revises JSW Steel, Tata Steel outlook to negative

Fitch has lowered the ratings of 28 corporates in the APAC region, and made negative revisions to the rating outlook for a further 32 large undertakings, driven by the impact of COVID-19 pandemic

twitter-logoManali | June 2, 2020 | Updated 19:52 IST
Fitch Ratings downgrades Future Retail, Tata Motors; revises JSW Steel, Tata Steel outlook to negative
Fitch Ratngts pointed out that the homebuilding sector has seen the largest number of downgrades between March 10 and May 31

India's Tata Motors, Future Retail, JSW Steel Ltd, Tata Steel Ltd, and Cairn India Holdings Ltd. are amongst top corporates in the Asia Pacific (APAC) region which have either been downgraded or given a negative revision (to their rating outlook) by Fitch Ratings.

The American credit rating agency has lowered the ratings of 28 corporates in the APAC region, and made negative revisions to the rating outlook for a further 32 large undertakings, driven by the impact of COVID-19 pandemic.

Where Future Retail's rating has been downgraded to CCC+ from BB(EXP), Tata Motors's rating has been lowered to B from BB-.

Meanwhile, JSW Steel Ltd and Tata Steel Ltd were both downgraded by one notch to BB-(negative outlook), reflecting the weaker outlook demand in India, lower steel prices, and the stoppage of business activity following government-mandated curbs designed to restrict the spread of coronavirus, Fitch Ratings said in its report.

ALSO READ: Moody's cuts India's sovereign rating to Baa3, maintains negative outlook

The other Indian companies mentioned in the report are Samvardhana Motherson Automotive Systems Group B.V (a material subsidiary of Motherson Sumi Systems Limited) to BB from BB+, Cairn India Holdings Ltd to B+ from BB-,HPCL-Mittal Energy Limited (HMEL) to BB (negative outlook) from BB (stable outlook), Future Retail Ltd to B- from BB, and HT Global IT Solutions Holdings Ltd to BB-(negative outlook) from BB-(stable outlook).

The other countries' major corporates whose ratings have been downgraded multi-notch in May are Chinese homebuilder Tahoe Group [lowered to CC from B-/RWN (rating watch negative or negative outlook)], and Indonesia's Geo Energy Resources (downgraded to C from CC), reflecting weakening of financial liquidity.

Other multi-notch downgrades that have taken place since March 10, driven by the COVID-19 pandemic include Australia's Virgin Australia Holdings (to D from B+), and Sunshine 100 Holdings China Holdings (to CCC- from CCC+).

Chinese Mall owner Red Star Macalline Group's rating fell to speculative-grade (BB+/Stable) in April from investment-grade (BBB-/Stable).

ALSO READ: Why stock, bond markets shrugged off Moody's downgrade

Fitch has however mentioned in the report that the "pace of downgrades in May was significantly slower than in the previous two months; but as the impact of the pandemic evolves, the risk of further COVID-19-related rating adjustments remains."

The ratings agency highlighted that the pace of coronavirus-related downgrades or outlook/watch slowed in May with the month's total count of 14 which was half of April's 38.

The report further pointed out that the homebuilding sector has seen the largest number of downgrades, at six, between March 10 and May 31.

80% of the companies in this sector are Chinese homebuilders. Other sectors with high level of downgrades include oil & gas, autos & related, metals & mining, and gaming and hospitality.

Among the 28 downgrades, the homebuilding sector leads with six, followed by the oil and gas, auto and related, and metals and mining sectors with three downgrades each.

The homebuilding, oil & gas and auto sectors also top the list of additional 32 corporates for which outlook was revised in a negative direction, although four of the five outlook revisions in oil & gas relate to sovereign-related rating actions, Fitch said.

ALSO READ: Govt lowers GDP growth rates for Q1, Q2 and Q3 in revised data

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