International rating agency Moody’s on 6 March said it has affirmed Tata Motors’ BA3 ratings with outlook remaining positive, reported new agency PTI.
Moody’s has also affirmed Tata Motors Ltd’s (TML) Ba3 senior unsecured instrument ratings, Moody’s Investors Service said in a statement.
‘Ba’ are judged to have speculative elements and are subject to substantial credit risk with the modifier 3 indicating a ranking in the lower end of that generic rating category, according to Moody’s obligations.
“Moody’s has also maintained a positive outlook on all ratings,” it added.
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The latest rating affirmation follows TML’s 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, it said.
“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,” said Moody’s Senior Vice President Kaustubh Chaubal.
“With unit sales of less than 0.5 million, revenues of around USD 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),” Chaubal added.
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, the statement said.
In Moody’s view, the extraordinary support from Tata Sons will continue even after the demerger, keeping the one-notch uplift intact, it added.
With agency inputs.
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Published: 06 Mar 2024, 11:17 PM IST