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Tata Motors and JLR were upgraded to Ba3 from Ba1 by Moody’s. Regarding Tata Motors, the rating agency highlighted said its continued credit profile improvement on the back of strengthening profitability and free cash flows. This has seen it reduce borrowings despite high capex and thereby a reduction in debt-to-EBITDA of below 4x as of March 2023. This is expected to further improve to less than 2x at March 2024. The rating action also incorporates a one-notch uplift on expectation of extraordinary support for the company from its parent Tata Sons in a worst-case situation. With sufficient liquidity of $6.5bn as of September 2023 and operating cash flows of $8.3bn, Moody’s believes it is more than sufficient to meet its cash obligations of $8.9bn.
Regarding JLR, the upgrade reflected improvement in credit metrics on the back of strong operating performance over the past 12 months. It expects JLR to increase its order book by 2x in fiscal 2024 and its highly profitable vehicles to improve EBITA margins to over 8% from 3.3% in fiscal 2023. Its leverage, measured by debt-to-EBITDA is down to 2.2x for the TTM to September 2023, vs. 3.8x in March 2023 and 6.3x a year ago. This was helped by “substantial EBITDA growth” that reached a record level of just under £3bn. JLR’s recent bond buyback and absence of any dividend payments over the past five years shows its commitment to reducing debt, Moody’s notes. Besides, free cash flows have increased to nearly £2bn, further helping them meet debts due.
Tata Motor’s dollar bonds were stable with its 5.875% 2025s at 97.99, yielding 7.3%. JLR’s 7.75% 2025s were also trading flat at 100.26, yielding 7.6%.