INSUBCONTINENT EXCLUSIVE:
CRISIL Ratings downgraded premium car manufacturer Mercedes-Benz India Pvt
Ltd (MBIL) by a notch citing production cuts and weaker demand amid COVID19 outbreak.
The Indian arm of global rating company S-P cut the
strong linkages on account of the operational and financial support received from its parent, the revision in rating of Daimler has impacted
Ratings of parent, Daimler AG's (Daimler's) long term ratings to 'BBB+/Negative' from 'A-/Negative' on account of weaker global demand
outlook and production cuts taken by the company in view of the Covid-19 outbreak.
German-based Dailmer is the main parent company for
MBIL's immediate parent, Mercedes-Benz AG (Mercedes-Benz; 100% subsidiary of the ultimate parent, Daimler) plays an important role in the
overall Daimler group's revenue and profitability.
New Delhi has locked down the whole country since March 25, a move aimed at preventing
coronavirus that has killed thousands of people across the globe.
The negative outlook reflects the high degree of uncertainty regarding the
economic impact of the pandemic, its implications for global car sales, and how it could affect Daimler's performance and ability to manage
the expected earnings decline and cash outflows, the rating company said.
MBIL's long-term debt is in the form of external commercial
Besides, Daimler has also guaranteed MBIL's short-term working capital debt.
MBIL's adequate liquidity is driven by expectation of support
from the parent, Daimler, to provide ongoing and need-based support in case of exigencies.
As on March 31, 2020, outstanding external
short-term loans guaranteed by Daimler stood at Rs 1,729 crore on a sanctioned working capital and over draft limit of Rs 2324 crore
Further, MBIL also had cash surplus of just over Rs 300 crore as on March 31, 2020.
MBIL's production facility spread over 100 acres in
Chakan, Pune assembles a wide range of models including sedans and sports utility vehicles (SUVs) largely imported in CKD condition from
branches of Mercedes-Benz.
