Tata Motors shares in focus on revision in credit rating; key details

Shares of Tata Motors Ltd will be in focus on Friday morning after ratings agency ICRA revised it rating on long-Term non-convertible debentures, fund-based facilities, term loan and non-fund based facilities to AA+ from AA, with outlook stable. ICRA reaffirmed its rating on Tata Motors’ short-term debt, commercial paper and non fund-based facilities at A+.

ICRA said the upgrade in the long-term rating of Tata Motors factors in the improvement in its consolidated operational and financial profiles with significant deleveraging, supported by an improvement in the performance of Jaguar and Land Rover Automotive PLC (JLR) and strong performance across the domestic business segments.

ICRA Ratings noted that JLR’s operating income grew 26.8 per cent to 29.2 billion British pounds in FY2024 from 23.1 billion British pounds in FY2023, supported by increase in volumes sold to 4,01,303 units in FY2024 from 3,21,362 units in FY2023, leading to benefits from the economies of scale.

“This coupled with higher realisations on account of better product mix, efficiency improvement programmes leading to lower cash-flow breakeven volumes and stability in semiconductor supplies resulted in a significant increase in JLR’s operating profit margin (OPM) to 15.9 per cent in FY2024 from 10.7 per cent in FY2023. This led to a significant improvement in JLR’s free cash flows and reduction in its net debt,” ICRA said.

Moreover, ICRA said JLR’s deleveraging is expected to be continuously supported by sustenance of its operational performance, aided by an order book of around 1,33,000 vehicles at the end of FY2024 with RR, RRS and Defender contributing around 76 per cent to the order book.

“On the domestic business front, TML’s commercial vehicle (CV) business (at a standalone level) continued to benefit from its
shift to the demand-pull strategy with its revenues growing by 11 per cent to Rs 73,494.4 crore in FY2024 from Rs 65,964 crore in FY2023 and the OPM improving to 11 per cent from 7.6 per cent. While the market share in the CV business reduced slightly to 39.1 per cent in FY2024 from 41.7 per cent in FY2023, the impact is expected to be temporary and largely on account of the reduction in discounts,” it said.

Tata Motors is expected to continue to maintain its leadership position in the market, aided by its strong product portfolio, extensive sales and distribution network and brand equity, it said.

“TML’s performance in the passenger vehicle (PV) business also improved, supported by a strong market share in the domestic market. Moreover, its position in the electric vehicle (EV) segment continued to remain dominant with a 73 per cent market share in FY2024,” it said.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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