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Moody’s Confirms Tata Motors’ BA3 Ratings, Keeps Positive Outlook Intact

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Moody’s affirms Tata Motors’ BA3 ratings, maintains positive outlook

International rating agency Moody’s has affirmed Tata Motors’ BA3 ratings with a positive outlook, as reported by PTI. Moody’s has also affirmed Tata Motors Ltd’s Ba3 senior unsecured instrument ratings, indicating speculative elements and substantial credit risk. The positive outlook on all ratings has been maintained by Moody’s.

The affirmation of the ratings follows Tata Motors’ announcement of a demerger of its operations into two separate listed companies for commercial vehicles (CVs) and passenger vehicles (PVs), subject to shareholder and regulatory approvals. Moody’s Senior Vice President Kaustubh Chaubal stated that despite the demerger resulting in TML’s operations comprising only CVs, the company’s strong position in India’s CV industry and ability to generate free cash flow will support its credit profile.

With unit sales below 0.5 million, revenues around USD 9 billion, and EBITA margin around 8 percent, Tata Motors’ CV operations are expected to generate ample free cash flow with strong credit metrics. The Ba3 CFR incorporates a one-notch uplift, reflecting Moody’s expectation of extraordinary support from Tata Sons Ltd.

Moody’s believes that the extraordinary support from Tata Sons will continue even after the demerger, maintaining the one-notch uplift. Overall, the affirmation of Tata Motors’ ratings by Moody’s reflects confidence in the company’s financial stability and ability to navigate industry challenges.

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