Tata Motors edges higher after Moody's affirms ratings with 'stable' outlook

Tata Motors gained 1.32% to Rs 1031 after Moody's Investors Service affirmed the company's 'Ba3' corporate family rating while maintaining a 'positive' outlook on all ratings.

The rating affirmation follows Tata Motors Limiteds (TMLs) announcement earlier this week that its board of directors have agreed in principle the demerger of its operations into two separate listed companies for commercial vehicles (CVs) and passenger vehicles (PVs), respectively, subject to shareholder and regulatory approvals.

While the demerger would result in TML's remaining operations comprising only CVs, the company's strong foothold with about 40 per cent share in India's growing CV industry and the business' demonstrated ability in generating large free cash flow through industry cycles will support its credit profile.

Kaustubh Chaubal, Moody's senior vice president, said: "With unit sales of less than 0.5 million, revenues of around $9 billion and EBITA margin at about 8 per cent, TML's CV operations will likely generate ample free cash flow with credit metrics substantially strong for a Ba3 CFR (corporate family rating)."

The Ba3 CFR continues to incorporate a one-notch uplift, reflecting Moody's expectation of extraordinary support for TML from its parent Tata Sons Ltd in times of need.

Moody's expects all of TML's businesses to continue to deliver on their strategic growth priorities while maintaining a balanced financial policy that focuses on achieving net-zero automotive debt by March 2025.

Tata Motors, a global automaker, is a leader in cars, trucks, buses and electric vehicles. The company has a strong presence in India, UK and other international markets.

The auto major reported a consolidated net profit of Rs 7,025.11 crore in Q3 FY24, steeply higher than Rs 2,957.71 crore in Q3 FY23. Revenue from operations rose 25.07% YoY stood to Rs 1,09,799.22 crore in the quarter ended 31 December 2023.

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