CHENNAI, Oct 24:
Credit rating agency S&P Global Ratings has revised its outlook on Tata Motors Passenger Vehicles Ltd (Tata Motors PV) to negative owing to the slow recovery of operations at Jaguar Land Rover.
The credit rating agency affirms its ‘BBB’ rating of Tata Motors PV.
“The negative outlook reflects our view that a recovery from the operational disruption following a cyber incident at JLR could be prolonged and lead to Tata Motors PVs’ credit metrics staying weaker for longer,” S&P Global Ratings said.
The credit rating agency expects cash flow at Tata Motors Passenger Vehicles Ltd (formerly known as Tata Motors Ltd.) to be significantly lower due to a prolonged operational disruption at its wholly owned subsidiary, Jaguar Land Rover Automotive PLC (JLR).
JLR has since resumed production and is gradually ramping up.
Post the demerger of the commercial vehicle operations, JLR accounts for more than 80 per cent of Tata Motors PVs’ earnings.
“We therefore revised our outlook on Tata Motors PVs and TML Holdings Pte. Ltd. to negative and affirmed our ‘BBB’ long-term issuer credit rating. Also, we lowered the long-term issue rating on the senior unsecured notes that TML Holdings issued to ‘BBB-‘ from ‘BBB’,” S&P Global Ratings said.
“We estimate revenue will decline 15 per cent-18 per cent, to about EUR 24 billion in fiscal 2026 (ending March 31, 2026). JLR’s profitability will also take a hit because its investment intensity will remain steady.
The company’s S&P Global Ratings-adjusted EBITDA margins will decline to 3 percent-5 percent in fiscal 2026, from 7.6 percent in fiscal 2025,” the credit rating agency said.
The cyberattack, which began on Aug. 31, 2025, has materially hampered JLR’s operations. Production was completely halted throughout September and the first week of October.
JLR recently reported that the groupwide system shutdown drove down wholesale and retail volumes in the September 2025 quarter by 24.2 percent and 17.1 percent, respectively, versus the same period a year ago, said S&P Global Ratings.
The impact of JLR’s loss of volumes is more pronounced post the demerger.
According to S&P Global Ratings, it had expected that the demerger of the commercial vehicles business would be neutral to its rating on Tata Motors PVs.
“However, given the subsequent cyberattack at JLR since our forecast and the subsequent loss of revenue, we now project Tata Motors PVs’ ratio of S&P Global Ratings-adjusted net debt to EBITDA will trend closer to 2.5x-3.0x in fiscal 2026 and 2027,” S&P Global Ratings said.
Its ratio of funds from operations (FFO) to debt is also likely to weaken to 15 per cent-25 per cent in fiscal 2026 and 2027 (pro forma the demerger), from more than 100 percent in fiscal 2025, it said.
“JLR will account for more than 80 per cent of Tata Motors PVs’ earnings going forward, in our assessment, with the remaining being passenger vehicle sales primarily in India under the Tata brand,” S&P Global Ratings said.
Tata Motors demerged its commercial vehicles business into a separate legal entity, TML Commercial Vehicles Ltd with effect from Oct. 1, 2025.
Commercial vehicles previously accounted for 15 per cent-20 per cent of revenue and up to 15 per cent of reported EBITDA of the parent group. The segment generated higher returns on capital than other divisions, and carried low leverage.
The credit rating agency believes a recovery in JLR’s earnings is subject to a series of uncertainties both related to market conditions and to the consequences of the cyberattack. While JLR has resumed production operations, the ramp up to full capacity will likely be gradual.
Nonetheless, there could still be some permanent loss of production volume. This, in conjunction with U.S. tariff-related headwinds, and a potential delay in key product launches could pose further downside risks. Also, such risks would intensify if rising sales volumes in other regions are not enough to offset prolonged weakness in China, the rating agency said.
S&P Global Ratings believe Tata Motors PVs’ India passenger vehicle business will generate sufficient cash flow to fund its investments of up to Rs.60 billion annually, with limited dependence on external debt over the next two years.
“We could lower our rating on Tata Motors PVs if a recovery in JLR’s earnings from the cyber incident is slower than we expect due to weak rebound in sales volumes, hit to the brand’s reputation, and delay in new model launches,” S&P Global Ratings said.
According to the credit rating agency, it could revise the outlook to stable if Tata Motors PVs’ credit metrics improve faster than its base case assumption owing to a quick recovery in JLR’s sales volume and stable operating cash flows. (UNI)
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