S&P places issuer ratings on Tata Group firms on CreditWatch positive

Standard and Poor's (S&P) on Friday placed long-term issuer ratings on Tata Steel ('BB'), Tata Motors ('B'), TML Holdings Pte. Ltd. ('B'), and Jaguar Land Rover Automotive PLC ('B') on CreditWatch with positive implications.

"Although the group companies still operate independently under professional directors and management, we observe a greater influence of Tata Sons on the strategy and financial policies of the group,” the rating agency said.

S&P could potentially reassess the relationship between these Tata Group entities and the holding company Tata Sons Pte. Ltd, the potential for extraordinary support from Tata Sons, and therefore the ratings on these group entities. “We regard the credit quality of Tata Sons to be strongly investment grade,” S&P said in a statement today.

Tata Sons and its subsidiaries, and associates have become more cohesive in recent years. Earlier, the rating agency considered Tata Sons as an unlisted investment holding company for the group. It did not factor in any direct support (from Tata Sons) in assessing the credit profiles of the individual group companies.

It will seek to resolve the CreditWatch in the next four to six weeks. It will focus on the strength of the relationship as well as the extent and form of potential financial support that the various entities could receive from Tata Sons, it added.

The review will also focus on whether the support could vary depending on each entity's strategic importance, branding, and financial contribution to the group.

There is a perceived influence on financial policy. Several Tata group entities have recently prioritised debt reduction to a greater extent, which is consistent with Tata Sons' objectives. Influence over financial policy is a key consideration in assessment of the evolving relationship within the group and potential group support.

Also, Tata Sons has increased ownership in entities. Between 2019 and 2021, Tata Sons significantly increased its ownership in several group companies.

There is more evidence of financial support. Historically, Tata Sons has supported group entities via equity participation in certain situations. The recent support to entities such as Tata Teleservices provides further evidence of financial support during times of liquidity stress.