Good news for Tata Motors shareholders! S&P Global Ratings BIG predictions on company, says balance sheet strength to offset…
S&P Global Ratings said Tata Motors’ solid balance sheet will help to offset the impact of its planned commercial vehicle business demerger and potential risks associated with the proposed acquisition of Italian firm Iveco.
The rating agency noted that the company’s credit profile is in a transition phase, shaped by the Iveco deal, the impending demerger, moderating demand, and tariff-related uncertainties. Despite these challenges, S&P said Tata Motors’ balance sheet remains robust.
S&P Global Ratings On Tata Motors
“The Iveco acquisition will not affect our rating on Tata Motors (BBB/Stable/–). This is because the rated entity will only house the passenger vehicles business after the demerger, which will likely conclude shortly,” the ratings agency said.
A new entity will hold the commercial vehicle business, and Iveco will fall under this entity once the acquisition is complete, possibly by April 2026.
Last month, Tata Motors announced that it would acquire Italian commercial vehicle maker Iveco Group, excluding its defence business, for euro 3.8 billion (nearly Rs 38,240 crore) in a deal which is set to be the Indian automaker’s biggest buyout.
S&P Global Ratings further said Tata Motors’ passenger vehicle business will be under Tata Motors Passenger Vehicles Ltd. The company will include TML Holdings Pte. Ltd. (BBB/Stable/–), the holding company for the group’s international operations and issuer of the rated senior unsecured notes.
“We view Tata Motors’ proposed acquisition of Iveco as strategic. It will expand the group’s scale and geographic diversity. We estimate the acquisition will increase Tata Motors’ commercial vehicles revenue and EBITDA by about 2x from fiscal 2026 (year ending March 31) levels,” it noted.
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It further noted that the performance of the passenger vehicles business, including its subsidiary, Jaguar Land Rover Automotive PLC (JLR), is likely to remain weak through fiscal 2026.
“Geopolitical uncertainties pose significant downside risks. Commercial vehicle sales volumes are also likely to remain under pressure, but higher realisations could temper the impact on revenues,” it said.
Still, S&P Global Ratings said, “Tata Motors’ efforts to pay down debt over the past two years will allow it to navigate the tough operating conditions. For now, we estimate the company’s ratio of funds from operations to debt will stay above 100 per cent over the next 12-24 months, maintaining sufficient headroom versus the downside trigger of 40 per cent.”
The outlook also reflects JLR’s continued progress in its transition to production of electric vehicles, including the launch of an electric Range Rover model by the end of the year, it said.
(With Inputs From PTI)
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