Moody's upgrades Tata Motors on JLR boost, strong domestic ops

New Delhi: Rating agency Moody's has upgraded the country's largest automaker Tata Motors' rating by a notch on account of continued strong performance of its British arm Jaguar Land Rover (JLR) and improvement in the company's domestic business.

Moody's has assigned Ba1 rating to Tata Motors, up from the earlier Ba2, the rating agency said in a statement today.

"The upgrade of Tata Motors ratings reflects our expectation of its continued strong performance, in particular, led by its wholly owned subsidiary JLR's successful track record of solid operations, and the improvement in Tata Motor's Indian business, mirroring in turn the recovery in the commercial vehicle cycle," Moody's Vice President and Senior Analyst Kaustubh Chaubal said.

Although JLR accounted for around one half of Tata Motors' group volumes in 2015-16, it generated more than 82 per cent of group revenues and over 86 percent of group EBITDA.

"Looking ahead, we expect JLR to continue to dominate the group's revenue and EBITDA, with its broadening product range -- especially in the Jaguar range of cars -- its strengthening geographic diversity and the expected diversification in its manufacturing footprint outside of the UK," Moody's said.

More importantly, the company's Indian business continues to perform robustly with the revival in the business cycle and steady launches in passenger vehicles, it added.

"With commercial vehicles in India, where the company commands more than 50 percent per cent of the market, we expect demand prospects to remain strong for the next 12-18 months," it said.

Replacement of ageing fleet in preparation for India's new Bharat Stage IV emission standards that will roll out in April 2017 will support such sales, it added.

The rating agency however noted that the company's passenger vehicles business in India is still a drag on its operations, although it accounts for only around 12 percent of the group's global volumes.

"Nevertheless, passenger vehicles are a strategic business for Tata, and we expect that the roll-out of its growth strategy -- which includes two planned launches each year and new product investments -- will help the company gain some of its lost market share in a segment that is crowded with domestic and large multinational competitors," Moody's said.