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Bond Market News
Tata Steel Upgraded to IG; Tata Motors and JLR also Upgraded
October 22, 2021
Tata Steel, Tata Motors and JLR were upgraded by S&P. With the upgrade, Tata Steel and its 100%-owned subsidiary ABJA Investment have now moved to investment-grade (IG), making it a rising star. S&P upgraded the steel major to BBB- from BB. Tata Motors and its 100% subsidiary TML Holdings were upgraded to BB- from B. Jaguar Land Rover Automotive (JLR) was upgraded to B+ from B. All three companies were given a stable outlook.
The upgrades reflects S&P’s view that the “credit profiles of the various Tata Group entities are strengthened by their importance to Tata Sons, with potential for financial support, if required”. S&P added that it expects Tata Sons to have a “positive influence on the long-term strategy, financial policies and funding access of its group entities.” While Tata Sons is not rated per se, S&P considers them to be “strongly investment grade”. Tata’s group companies have prioritized debt reduction, in line with Tata Sons’ policy and these companies have a legacy status, accounting for a sizeable share of the group’s EBTIDA and assets. Also, they are closely linked to the group’s reputation and risk management. However, despite the close linkage to the larger group, the extent of the rating uplift is constrained by Tata Sons’ minority ownership in these companies, a relatively small share in the cash flow and portfolio value at the Tata Sons level, and the limited operational and financial integration between entities.
Tata Steel’s dollar bonds were higher, with its 5.95% 2024s up over 1.2 points to 109.7, yielding 2.3%. Its bonds have jumped from 104.3 to 109.7 since October 11. Tata Motors’ USD 5.875% 2025s were up 0.5 points to 107.2, yielding 3.7%. JLR’s USD bonds were stable with its 5.5% 2029s at 97.6, yielding 5.9%.
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