Standard & Poor's Ratings Services (S&P) Tuesday revised to stable from positive its outlook on India-based automaker Tata Motors. At the same time, Standard & Poor's affirmed its  'BB' long-term corporate credit rating and 'BB' long-term issue ratings on the U.S.-dollar denominated senior unsecured notes issued by the company.

The rating agency said, "We revised the outlook to stable as the lengthening slowdown in China and continued capital expenditure by Jaguar Land Rover Automotive Plc (JLR), Tata Motors' key wholly owned subsidiary, will result in negative free operating cash flow for Tata Motors. As a result, the company's ratio of funds from operations (FFO) to debt will be weaker at about 20%, instead of our previous expectation of above 30%."

Standard & Poor's credit analyst Abhishek Dangra said,  "We believe the slowdown in Chinese demand--the key driver for growth for JLR and other luxury carmakers in the past few years--will result in weaker operating performance and lower margins for Tata Motors than we had previously anticipated."

"Although global new model launches can support growth in fiscal 2017, we now expect fiscal 2016 EBITDA to be weaker," he added. 

Based on JLR's successful launches in the Land Rover range, the rating agency is optimistic that continuing growth in other international markets and planned new launches for Jaguar can offset some of the weakness in China demand from fiscal 2017.

Shares of the company gained Rs 5.55, or 1.92%, to trade at Rs 294.20. The total volume of shares traded was 230,626 at the BSE (10.09 a.m., Wednesday).