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Research Announcement:

Moody's - Tata Motors faces tougher recovery than Jaguar Land Rover, but credit quality will remain closely linked

16 October 2020


Singapore, October 16, 2020 --

  • Support from Tata Sons mitigates operational challenges at TML, keeping rating at the same level as JLR
  • Electrification and political developments pose further downside risk and will prolong recovery

Moody's Investors Service says in a new report that the uncertain pace of recovery in global auto demand will continue to weigh on Tata Motors Limited (TML, B1 negative) and its wholly owned subsidiary Jaguar Land Rover Automotive Plc (JLR, B1 negative) over the next 12-18 months, as reflected in their negative rating outlooks.

"We do not expect global auto shipments to recover to pre-pandemic levels until the middle of the decade, while further lockdowns, the transition to electric vehicles, emission compliance requirements and – for JLR – Brexit all pose further downside risk," says Tobias Wagner, a Moody's Vice President and Senior Credit Officer.

TML's underlying credit profile has deteriorated to a level weaker than JLR's, but the ratings remains the same thanks to a one-notch uplift to reflect likely support from parent Tata Sons Limited in times of need. JLR's rating does not incorporate an uplift for likely support from parent TML, due to the latter's weaker credit quality. Still, the subsidiary remains strategically important to both TML and Tata Sons, a credit positive for the rating.

"TML's credit profile had previously benefited from the different demand dynamics in its JLR and non-JLR segments, but the pandemic has hurt demand across all major markets, while the profitability and liquidity of its Indian operations also have weakened," says Kaustubh Chaubal, a Moody's Vice President and Senior Credit Officer.

Moody's expects TML's and JLR's financial metrics will remain in breach of rating downgrade triggers over the next 12-18 months, implying a sustained improvements in operations is required to maintain their current ratings.

For TML in particular, a return in outlook to stable would require an improvement at JLR as the key contributor to consolidated credit metrics, along with a recovery in the profitability of TML's Indian operations.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Kaustubh Chaubal
VP-Sr Credit Officer
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
JOURNALISTS : 852 3758 1350
Client Service : 852 3551 3077

Tobias Wagner, CFA
VP-Sr Credit Officer
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS : 44 20 7772 5456
Client Service : 44 20 7772 5454

Releasing Office :
Moody's Investors Service Singapore Pte. Ltd.
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Singapore, 048623
Singapore
JOURNALISTS : 852 3758 1350
Client Service : 852 3551 3077

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