Moody’s Upgrades Tata Motors’ Rating On Continued Strong JLR Performance

Moody's Investor Service has upgraded Tata Motors Ltd.'s rating to Ba1 from Ba2 with a stable outlook, on the company's continued strong performance led by its wholly-owned subsidiary Jaguar Land Rover, the rating agency said in a statement.

Tata Motors' JLR segment generated more than 82 percent of the group's revenue and over 86 percent of the earnings before interest, tax, depreciation and amortisation, despite accounting for just half of the company's total volumes, the rating agency said in a report.

Moody's expects JLR to continue dominating Tata Motors' revenue given the “broadening product range” of the luxury car maker – both in terms of models and geography. Taking manufacturing beyond the borders of UK will enhance JLR's competitiveness, especially “in the event of potentially new trade tariffs resulting from Brexit”, Moody's added.

Tata Motors' EBITDA margin of 4.1 percent is lower than Moody's upward rating trigger but the rating agency expects a recovery over the next 12 to 18 months.

The automaker's India unit continues to deliver a robust performance thanks to business cycle revival and steady launches in the passenger vehicles segment. In the commercial vehicles segment, Moody's expects “demand prospects to remain strong over the next 12-18 months.”