Tata Motors is set to draw attention in the financial markets as Moody's, a leading global credit rating agency, has recently upgraded the credit rating of the automaker and its wholly-owned subsidiary, Jaguar Land Rover Automotive Plc. This upgrade sees the credit rating move from B1 to Ba3 while maintaining a 'positive' outlook for both entities. The decision is rooted in Tata Motors' sustained improvement in profitability and free cash flow, allowing the company to reduce borrowings despite substantial capital expenditure. Moody's underscored the automaker's conservative financial policies, effectively balancing growth with prudent debt management. The credit rating agency foresees this approach supporting further enhancement in Tata Motors' credit profile over the next 12 to 18 months.
Notably, Tata Motors is steadfast in its pursuit of achieving a net zero automotive debt target by March 2025, according to Moody's. The agency anticipates a significant reduction in gross debt by almost 30% by March 2024 compared to levels in March 2022. This strategy aligns with Tata Motors' commitment to responsible financial management.
Moody's emphasized that the credit rating upgrade extends to all of Tata Motors' automotive operations, which encompass both the commercial vehicle (CV) and passenger vehicle (PV) businesses in India, collectively referred to as Tata Motors India. Additionally, the credit rating upgrade applies to its global premium passenger car business through the British wholly-owned subsidiary, Jaguar Land Rover Automotive Plc.
This positive credit rating adjustment reflects Moody's confidence in Tata Motors' ability to navigate and thrive in the automotive industry, considering its strategic financial decisions, commitment to debt reduction, and the overall improved performance of its various automotive divisions.
This development follows Moody's recent upgrade of the corporate family rating of another Tata Group company, Tata Power Ltd, to Ba1 from Ba2. Moody's cited Tata Power's strong financial metrics, underpinned by predictable cash flows from its distribution businesses and long-term power purchase agreements (PPAs) for renewable generation capacity, as the driving factors behind this upgrade.
Overall, these credit rating upgrades for Tata Motors and Tata Power reflect positively on the financial health and management strategies of these Tata Group companies, instilling confidence among investors and stakeholders in their respective industries.
