S&P Upgrades Tata Motors' Long-Term Issuer, Issue Credit Ratings To 'BB'

Rating agency S&P Global Ratings has raised Tata Motor Ltd’s (TML) long-term issuer and issue credit ratings from 'BB-' to 'BB' on earnings improvements, potential deleveraging, and a stable outlook.

Tata Motors Ltd.'s cash flow should strengthen over the next 12–18 months due to improving operating conditions in India and at its 100% subsidiary, Jaguar Land Rover Automotive Plc, the S&P statement added.

Solid earnings and free operating cash flow are expected to support debt reduction. The debt reduction at Tata Motors Ltd. will accelerate if it successfully lists its subsidiary, Tata Technologies Ltd., as planned.

The agency also upgraded the rating for TML’s core subsidiary, TML Holdings Pte Ltd from “BB-” to 'BB'.

"We may lower the ratings if Tata Motors' earnings decline materially and its cash flow drops such that its consolidated funds from operations to debt ratio remains below 20% on a sustained basis," S&P Global Ratings said.

Shares of Tata Motors Ltd. advanced 0.58% to Rs 476.3 apiece as of 11:24 a.m. in trade on Wednesday, compared to a 0.02% advance in the benchmark NSE Nifty 50 Index.

The stock gained as much as 0.83% intraday. The relative strength index was 68.3.

Out of the 36 analysts tracking the company, 29 maintain a 'buy' rating, four recommend a 'hold,' and three suggest to 'sell' the stock, as per the Bloomberg data.

The average calculated from the 12-month price target given by analysts implies a potential upside of 9.5%.