Moody’s upgrades Tata Motors’ ratings to Ba1, outlook remains positive

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26 Aug, 2025 12:21

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Ratings agency Moody's on August 7 said it has upgraded Tata Motors Limited’s (TML) corporate family rating (CFR) by two notches to Ba1 from Ba3 with the outlook remaining positive, due to the automaker’s revenue growth, improving profitability and debt reduction.

The agency also upgraded Tata Motors’ senior unsecured instruments' ratings to Ba1 from Ba3.

"TML's two-notch rating upgrade with a positive outlook follows the company's sustained track record in achieving revenue growth, improving profitability and reducing debt using its large free cash flow despite its elevated capital expenditure to refresh its products," Kaustubh Chaubal, a Moody's Ratings Senior Vice President, said in a press release.

The rating action considers the impact of TML's "sound governance practices" mainly in its creditor-friendly financial policies, track record and management prudence -- on its credit profile, which Moody's said it viewed as credit positive.

"Strong underlying demand in key geographies and business segments and a refreshed product slate that caters across different price points have paved the way for the continued improvement in TML's operating profile. These factors, alongside its cost rationalization efforts, have assisted in its margin recovery. TML's adjusted consolidated EBITA margin will improve to a solid 8%-8.5% over the next two years from 7% in the fiscal year ended 31 March 2024 (FY24) and 2%-4% over FY21 and FY23," Moody's said.

"We believe TML will sustain the improvement in all three of its automotive operations: commercial vehicle (CV) and passenger vehicle (PV) business in India, collectively referred to as TML India; and its global premium passenger car business through wholly owned subsidiary Jaguar Land Rover Automotive Plc (JLR, Ba2 positive)," it further added.

Jaguar Land Rover (JLR), which Moody's recently upgraded to Ba2 from Ba3, is expected to see slower revenue growth to around 3 percent in FY25 and FY26.

"Still, profitability will improve because of higher average sales prices and higher contribution margins from new products. Moreover, even after sizeable investments towards product development as well as new product platforms, JLR will generate at least £1 billion of free cash flow annually," Moody's added.