“The affirmation displays the sustained strengthening in TML’s consolidated credit score profile pushed by gross debt discount and earnings growth, that are accelerating deleveraging whilst the worldwide automotive trade faces difficult situations,” says Kaustubh Chaubal, a Moody’s
Rankings Senior Vice President.
“Concurrently, now we have upgraded JLR’s backed senior unsecured instrument rankings to Ba1 from Ba2. The outlook stays optimistic,” an organization submitting stated, quoting the score company.
In keeping with Moody’s Rankings, Tata Motors Ba1 Company Household Score (CFR) is a mirrored image of a number of key credit score strengths. The score company highlights TML’s sturdy international presence within the luxurious automotive phase by way of its wholly-owned subsidiary, Jaguar Land Rover Automotive Plc (JLR, Ba1 optimistic). Moody’s additionally factors to TML’s main market place in India throughout business autos (CVs) and its rising share in passenger autos (PVs).
Moreover, Moody’s credit TML’s dedication to creditor-friendly monetary insurance policies that successfully steadiness development with monetary self-discipline, thus supporting a stable credit score profile. The score company additionally acknowledges a long-standing, strategically necessary relationship with its guardian, Tata Sons. This relationship, in line with Moody’s, ends in a one-notch uplift to TML’s score as a result of expectation of extraordinary help, ought to or not it’s required.
Moody’s additionally notes that TML is at the moment within the strategy of demerging its CV operations right into a individually listed entity with mirror shareholding. Put up-demerger, which Moody’s expects to be efficient in October, the rated entity will embody all PV and PV-related companies, together with 100% possession of JLR. The score company anticipates that following this transaction, JLR will contribute over 90% of TML’s consolidated EBITDA, underscoring the rising convergence of their credit score fundamentals.
10 key takeaways in line with Moody’s:
1. US Tariff Publicity for JLR: Whereas TML’s India operations are largely unaffected, JLR stays uncovered to US automotive import tariffs, because the US accounted for about 30% of its international car gross sales in FY24-25. This threat might impression JLR’s gross sales, profitability, and free money movement in FY25-26.
2. TML India operations outlook: The outlook for TML’s India operations stays optimistic, pushed by rising per capita earnings, a rising working-age inhabitants, and sturdy substitute demand.
3. India PV quantity development: TML’s Passenger Car (PV) operations in India are anticipated to realize mid-single-digit quantity development in FY25-26, supported by new fashions, branding focus, and buyer satisfaction.
4. Put up-Demerger monetary projections: The surviving entity after the demerger (TML’s PV enterprise, together with JLR and India PV operations) is projected to generate a Moody’s adjusted EBIT margin of 4%-5% over the following two fiscal years.
5. Continued deleveraging trajectory: TML’s debt/EBITDA is anticipated to proceed its deleveraging development, reaching round 2.0x by March 2027, with free money movement remaining optimistic regardless of ongoing investments.
6. Strengthening credit score profile and funding grade trajectory: Total, TML’s credit score profile continues to strengthen, with key monetary metrics aligning with expectations and reinforcing its path in direction of an investment-grade score.
7. Working firm standing maintained: Regardless of the demerger, TML will protect its standing as an working firm by merging the PV subsidiary into TML, stopping it from turning into a pure holding firm.
8. Mitigated structural subordination threat: The expectation of extraordinary help from Tata Sons, the group’s apex holding firm with a robust monitor report of help, mitigates structural subordination threat for TML.
9. Liquidity place: TML maintains superb liquidity, with roughly $8.0 billion in consolidated money and equivalents as of March 2025. This, together with forecasted working money flows, comfortably covers its obligations, and JLR’s liquidity is additional bolstered by an undrawn £1.7 billion revolving credit score facility.
10) New launches: The upcoming launch of the Vary Rover Electrical later this yr and the primary all-electric Jaguar mannequin in 2026 are essential
milestones towards JLR’s aim of full electrification by 2030.
Threat
JLR’s BEV Transition Problem: JLR faces a big problem in its transition to Battery Electrical Autos (BEVs), with solely 2% BEV penetration in FY24-25, among the many lowest in its peer group. The profitable launch of the Vary Rover Electrical (late 2025) and the primary all-electric Jaguar (2026) are essential for its 2030 electrification aim.
(Disclaimer: Suggestions, solutions, views and opinions given by the consultants are their very own. These don’t signify the views of Financial Occasions)
