Post-CV demerger, S&P Global cuts Tata Motors PVs rating to BBB- from BBB—What it means for investors

Tata Motors Passenger Vehicles Stock: Shares of Tata Motors Passenger Vehicles (Tata Motors PVs), formerly Tata Motors, fell on Friday, October 24, following a negative outlook revision by S&P Global. At the time of reporting, the stock was trading at Rs 404.20, down Rs 1.65 or 0.41 per cent on the BSE.

S&P Global revises outlook

On Thursday, S&P Global revised the outlook on Tata Motors PVs and TML Holdings Pte. Ltd. to negative while affirming the 'BBB' long-term issuer credit rating. The ratings agency also lowered the long-term rating on senior unsecured notes issued by TML Holdings to 'BBB-' from 'BBB'.

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According to S&P Global Ratings, the difference between BBB and BBB- is a single step within the lowest tier of the "investment-grade" credit category. While both ratings indicate a generally reliable capacity to meet financial obligations, BBB signifies a slightly stronger creditworthiness than BBB-

Impact of JLR cyberattack

The downgrade reflects the prolonged operational disruption at Jaguar Land Rover Automotive PLC (JLR), a wholly owned subsidiary of Tata Motors PVs, following a cyberattack on August 31, 2025. Production at JLR was completely halted through September and the first week of October, reducing wholesale and retail volumes by 24.2 per cent and 17.1 per cent, respectively, in the September quarter compared to the previous year.

Credit metrics under pressure

S&P Global projects Tata Motors PVs’ S&P-adjusted net debt-to-EBITDA ratio to rise to 2.5x-3.0x in fiscals 2026 and 2027, from around 1.0x at the time of the commercial vehicle demerger. The funds from operations (FFO) to debt ratio is expected to weaken to 15%-25 per cent from over 100 per cent in fiscal 2025.

Revenue and profitability outlook

Revenue for Tata Motors PVs is estimated to decline 15%-18 per cent to about £24 billion in fiscal 2026, while S&P-adjusted EBITDA margins are expected to fall to 3%-5 per cent from 7.6 per cent in fiscal 2025. JLR now accounts for over 80 per cent of the company’s earnings post the commercial vehicle demerger, effective October 1, 2025.

Recovery remains uncertain

Although JLR has resumed production, the ramp-up to full capacity will likely be gradual. Risks include potential permanent loss of production volume, U.S. tariff-related challenges, and delays in key product launches, which could further pressure earnings.

India business provides some cushion

S&P Global expects Tata Motors PVs’ India passenger vehicle business to generate sufficient cash flow to fund investments of up to Rs 60 billion annually with limited dependence on external debt. Recovery in JLR operations could improve the FFO-to-debt ratio toward 40 per cent by fiscal 2028.