Moody’s downgrades Tata Motors’ outlook to negative, says credit recovery to take months

Global ratings agency Moody’s Ratings has affirmed Tata Motors a ‘Ba1‘ corporate family rating (CFR), changing the company’s outlook to negative from an earlier positive stance. The announcement comes on the day when the Jaguar Land Rover (JLR) maker said that some sections of its manufacturing operations will resume in the coming days.

The past few weeks have been testing for Tata Motors investors, with work at JLR’s three UK facilities in the West Midlands and Merseyside—Solihull, Wolverhampton, and Halewood getting stopped on September 1 after a cyber attack was reported on August 31. While Tata Motors shares have managed to hold ground on the back of positive Goods and Services (GST) news, the stock has been a sector underperformer, rising 0.7% when the Nifty Auto has surged 6%.

While Moody’s expects the company to withstand the disruption, it opines any material recovery would take several months from now.

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“The affirmation of TML’s Ba1 rating reflects our view that it will likely be able to withstand the impact of the cyber incident that has severely disrupted operations over the last four weeks at its wholly owned subsidiary, Jaguar Land Rover Automotive Plc (JLR, Ba1 negative)”, says Sweta Patodia, a Moody’s Ratings assistant vice president and analyst.

“The outlook change to negative from positive reflects our view that a full recovery in credit metrics will likely take several months”, adds Patodia, who is also Moody’s lead analyst for TML.The cyber incident at JLR highlights the customer relations risk captured under social risk considerations within Moody’s ESG framework, and is the key driver of today’s rating action.Also read: PSU banks’ m-cap jumps 5X since FY20: 5 triggers that could drive re-rating & more upside

Earlier today, a JLR spokesperson said the company’s controlled, phased restart is progressing, with Tata Motors’ UK subsidiary taking further steps toward recovery and resuming manufacturing.

“We continue to work around the clock alongside cybersecurity specialists, the UK Government’s NCSC and law enforcement to ensure our restart is done in a safe and secure manner. Today we are informing colleagues, retailers and suppliers that some sections of our manufacturing operations will resume in the coming days,” the spokesperson said.

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