Tuesday, October 13, 2015

S&P assigns investment grade rating to M&M with stable outlook

Global ratings agency S&P today assigned an investment grade, long term corporate credit rating of BBB—, to homegrown auto major Mahindra & Mahindra with a stable outlook.

S&P’s rating reflects the company’s leading market position in tractor and utility vehicle (UV) segments, strong financial ratios, and financial flexibility arising out of significant investments in group companies, the company said in a statement.

Besides, this rating action of S&P is also based on M&M’s conservative leverage policies, healthy cashflow generation, risk mitigation through presence in various businesses with a pan-India footprint and a good mix of rural and urban customers, it said.

The rating is equivalent to India’s sovereign rating.

Commenting on the development, Mahindra Group Chairman Anand Mahindra said: “S&P’s rating is an important event in M&M’s 70-year history. To add, the investment grade ratings from S&P demonstrates a unanimous vote of confidence in M&M’s diversified business model, stellar credit profile and high standards of corporate governance practices. We certainly celebrate the ratings as a worthy milestone in M&M group’s global aspirations.”

Last week M&M was assigned Baa3 ratings by Moody’s.

With S&P’s and Moody’s ratings, M&M will now enjoy dual investment grade ratings which are equivalent to India’s investment grade sovereign ratings from both the above agencies, the company said.

On the significance of the ratings, M&M Group CFO VS Parthasarathy told PTI: “This gives us the additional option to choose from, as and when required, to borrow through international bonds with tenure ranging from 10—30 years at much lower rates.”

Earlier, the company’s options were limited to domestic borrowings and through ECBs of tenure of up to 5 years, he added.

He, however, declined to comment on whether the company is looking to raise funds in the near future on the back these ratings.

“We have reasonable cash and our consolidated debt-equity ratio is equal to zero,” he added.

“The rating will serve to enhance M&M’s prestige in the international capital markets. The investment grade rating is a validation of our management vision and we hold it dear as a commitment to the path of excellence,” Parthasarathy added.

On the domestic front, M&M has been already assigned the highest credit rating of AAA by all four leading domestic credit rating agencies, CRISIL, India Ratings, ICRA and CARE.

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