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Tata Motors, JLR Upgraded by S&P to BB+/BB
November 15, 2023
Tata Motors and JLR were upgraded by a notch to BB+ and BB by S&P, less than a week after Moody’s upgraded them to Ba3. S&P believes that Tata Motors’ debt reduction will likely accelerate over the next 12-18 months, led by strong free operating cash flow (FOCF) at JLR. They expect JLR to report positive FOCF of over £2bn in fiscal 2024 and 2025, helping “drive sharp deleveraging at Tata Motors”. For fiscal 2023, they see an FOCF of about £500mn. Leverage should drop from 3x currently to less than 1x by March 2025, they noted. S&P also said that Tata Motors’ Indian operations are seeing “solid operating performance” with debt reduction also helped by monetization of non-core assets. Besides, regarding JLR, they also see its wholesale volumes rise to more than 400k vehicles in fiscal 2024 and rise further in fiscal 2025. S&P further added that more deleveraging and a positive EV transition at JLR would be key considerations for a higher rating in the future. JLR’s liquidity at £5.8bn and its recent dollar bond buyback also help reflect “proactive use of its liquidity”.
Tata Motor’s dollar bonds were stable with its 5.875% 2025s at 98.18, yielding 7.2%. JLR’s 7.75% 2025s were also trading flat at 100.35, yielding 7.54%.
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