New Delhi, Jul 13 (PTI) Moody's Investors Service on Monday downgraded the rating outlook of auto component maker Motherson Sumi Systems to negative on account of expected weak financial performance in this fiscal due to the coronavirus pandemic.

Moody's changed the outlook on the rating to 'negative' from 'ratings under review', the rating agency said in a statement.

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This rating action concludes the review for downgrade that was initiated on March 27, 2020, it added.

Moody's, however, confirmed Ba1 corporate family rating (CFR) for the auto component firm.

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"The confirmation of Motherson's rating reflects our view that while the challenges brought by the coronavirus pandemic will keep the company's credit profile weak in the fiscal year ending March 2021, its financial metrics should start to recover the following year," Moody's Vice President and Senior Credit Officer Kaustubh Chaubal said.

However, even with a recovery, Motherson's leverage and profitability will stay weak for its Ba1 CFR, reflected in the negative outlook, Moody's said.

The negative outlook also reflects weak liquidity and the company's upcoming refinancing tasks under more challenging market conditions, it added.

"The negative outlook indicates the risk of a downgrade if the global auto industry does not recover, with a slower-than-anticipated recovery in the company's financial metrics," Chaubal noted.

Earlier this month, Motherson Sumi announced that it will split its domestic wiring harness business to form a new entity, and merge it with Samvardhana Motherson International Ltd (SAMIL), which currently holds 33 per cent stake in the auto component firm.

Both transactions will be cashless and will be undertaken by an issuance of shares. The transaction currently awaits regulatory approvals and is expected to be completed by September 2021.

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