(The following statement was released by the rating agency) SINGAPORE/MUMBAI, January 29 (Fitch) Fitch Ratings has affirmed India-based Tata Motor Limited's (TML) Long-Term foreign currency Issuer Default Rating (IDR) at 'BB'. The Outlook is Stable. KEY RATING DRIVERS Strong Financial Profile: TML's consolidated financial profile remains strong with consolidated leverage (net debt/ operating EBITDA) of 0.6x in in the financial year ending 31 March 2014 (FY14) (FY13: 1.09x). The company's net leverage excluding its financing subsidiary - Tata Motors Finance Ltd (TMFL) - was at 0.2x (FY13: 0.4x). The strong financial profile is driven mainly by the robust performance of TML's key subsidiary, Jaguar Land Rover PLC (JLR, BB-/ Positive). The financial profile also benefits from TML's good financial flexibility and JLR's liquidity with a cash balance (GBP3.75bn as of 1HFY15) and undrawn committed facilities (GBP1.3bn). Fitch expects TML's consolidated profile to remain strong over the medium term despite its large capex plans (FY14 Capex: INR 269bn). The agency expects the capex to be funded largely from TML's operational cash flows supported by the continuing sound operations of JLR and improvement in its Indian business. Furthermore, the company announced its rights issue plan, which if successful will further strengthen the financial profile. Robust Performance of JLR: Fitch expects JLR's sales and profitability to continue to be robust over the medium term, supported by a strong product pipeline and healthy global demand for premium vehicles. This is in spite of a likely increase in costs associated with the company's large capex and increasing competition. JLR's EBITDA margin strengthened to 19.9% during 1HFY15 (1HFY14: 16.7%) supported by growth in volumes (13.8%) and a richer product and geographic mix. Indian Operations to Improve: Fitch expects TML's new product launches, both in passenger car and commercial vehicles, to drive volume growth in its Indian operations. In addition, lower fuel prices, improving consumer sentiment and a likely reduction in borrowing costs are likely to support improvement in demand growth in passenger cars from FY16. We also expect medium and heavy commercial vehicles (M&HCV) volumes to grow in FY16 - supported mainly by replacement demand. TML's operations turned around in 3QFY15 as a result of positive volume growth in its passenger car and M&HCV segments. The company's volumes fell until 1HFY15, resulting in negative EBITDA in FY14 and 1HFY15. Linkages with Tata Group: The FC IDR of TML continues to benefit from a one notch uplift on account of the potential support from the Tata group. Fitch has also reviewed the ability of the Tata group to provide support to TML and in the context of potential group support, TML continues to benefit from the strategic importance of TML to the group. Any weakening of linkages between the group and TML, and/or the group's inability to provide support is likely to affect the ratings negatively. RATING SENSITIVITIES Negative: Future developments that may collectively or individually lead to negative rating actions include: -a weakening of linkages between the Tata Group and TML -consolidated financial leverage (excluding TML's auto financing subsidiary Tata Motors Finance Limited) exceeding 2.0x on a sustained basis due to reduced sales or profitability (at TML, JLR or both), or due to higher than expected debt levels Positive: Future developments that may collectively or individually result in positive rating actions include: -strong growth in sales volume for TML (standalone) and JLR through increased geographic and product diversification, while maintaining strong profitability Contact: Primary Analyst Hasira De Silva Director +65 6796 7240 Fitch Ratings Singapore Pte Ltd 6 Temasek Boulevard #35-05 Suntec Tower Four Singapore 038986 Secondary Analyst Muralidharan R Director +91 22 4000 1732 Committee Chairperson Jeong Min Pak Senior Director +82 2 3278 8360 Media Relations: Bindu Menon, Mumbai, Tel: +91 22 4000 1727, Email: [email protected]; Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: [email protected]. Additional information is available on www.fitchratings.com Applicable criteria "Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage", dated 28 May 2014, are available at www.fitchratings.com. Applicable Criteria and Related Research: Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393 Additional Disclosure Solicitation Status http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=978795 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.