Based on the company’s improved financial profile, rating agency CRISIL has upgraded Mahindra & Mahindra’s credit facilities with banks to stable. The ratings were revised despite expected debt burden on the company for acquiring controlling stake in Ssangyong Motor.
“CRISIL has upgraded its rating on long-term bank facilities of Mahindra to ‘AA+/Stable’ from ‘AA/Positive’. The upgrade has been driven by significant improvement in Mahindra’s financial risk profile, particularly capital structure after conversion of its convertible bonds to equity shares in October 2010,” a company statement said.
An ‘AA’ long-term rating means instruments offering a high degree of safety with regard to timely payment of financial obligations. CRISIL also maintained the rating on the short-term facilities and commercial paper programme of M&M at ‘P1+’ that indicates that repayment of these borrowings is quite safe.
CRISIL said that the Mahindra’s financial risk profile will remain strong over the medium term despite its debt-funded investment plans, including acquisition of Ssangyong Motor Company.
“Furthermore, Mahindra’s operating performance, which improved significantly in 2009-10, remained strong in the first half of 2010-11. CRISIL believes that Mahindra’s cash accruals will remain robust over the medium term, despite some decline in operating margins because of increase in raw material prices,” it said.