Moody’s Affirms Tata Motors Rating At ‘Ba1’, Outlook Stays Positive

Moody’s Ratings on Friday affirmed Tata Motors Ltd.’s corporate family rating at ‘Ba1’ and maintained a ‘positive’ outlook, citing a sustained strengthening in the company’s consolidated credit profile. The agency pointed to gross debt reduction and expanding earnings that are helping accelerate deleveraging, even amid challenges in the global auto industry.

Despite the improved credit metrics, Moody’s stopped short of upgrading the rating to investment grade. The agency said an upgrade would depend on the company achieving key targets such as net debt below zero, high single-digit EBIT margin, positive free cash flow, and very strong liquidity.

Moody’s upgraded the corporate family rating of Tata Motors’ wholly-owned subsidiary Jaguar Land Rover Automotive Plc to ‘Ba1’ from ‘Ba2’, with a positive outlook.

 It said that following the upcoming demerger of Tata Motors’ commercial vehicles business, JLR will become an even more critical part of the automaker’s core operations. This would also strengthen the likelihood of support from parent Tata Sons extending to JLR, the agency said.

Moody’s warned that any deviation in Tata Motors’ financial policy resulting in consolidated debt to EBITDA staying above 3.5x, or a deterioration in cash flows or liquidity, could trigger negative rating pressure.

Tata Motors faces payment obligations of $5.9 billion over the next year and a few months. This includes $2.3 billion in debt repayments, $3.1 billion in capex, and $500 million in dividends. Moody’s expects the group’s cash reserves, along with forecasted operating cash flows of $3.6 billion through September 2026, to comfortably meet these obligations.