Moody's upgrade Tata Motors' ratings by two notches, keeps outlook positive

Moody's Ratings on Wednesday said it has upgraded Tata Motors Ltd's corporate family rating by two notches to Ba1 from Ba3 citing sound governance practices, particularly the company's creditor-friendly financial policies, track record and management prudence.

The ratings agency also said it has upgraded Tata Motors Ltd's (TML) senior unsecured instruments' ratings to Ba1 from Ba3.

As per Moody's obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk.

Moody's said in a statement that it has also maintained the positive outlook on all ratings.

"TML's two-notch rating upgrade with a positive outlook follows the company's sustained track record in achieving revenue growth, improving profitability and reducing debt using its large free cash flow despite its elevated capital expenditure to refresh its products," Moody's Ratings Senior Vice President Kaustubh Chaubal said.

The latest rating action considers the impact of TML's sound governance practices -- in particular its creditor-friendly financial policies, track record and management prudence -- on its credit profile, which we view as credit positive, the statement added.

Explaining the rationale behind the ratings, Moody's said strong underlying demand in key geographies and business segments and a refreshed product slate that caters across different price points have paved the way for the continued improvement in TML's operating profile.

"These factors, alongside its cost rationalization efforts, have assisted in its margin recovery," it added.

Further, it said,"We believe TML will sustain the improvement in all three of its automotive operations -- commercial vehicle (CV) and passenger vehicle (PV) business in India, collectively referred to as TML India; and its global premium passenger car business through wholly owned subsidiary Jaguar Land Rover Automotive Plc (JLR, Ba2 positive)."

On the outlook, it said,"The positive outlook reflects our view that the upgrade momentum on TML's ratings to investment grade will continue with the company's steady focus on strategic growth priorities while maintaining a balanced financial policy that focuses on achieving and sustaining net-zero automotive debt.