Moody’s downgrades Tata Motors’ outlook over JLR incident

Moody’s Ratings on Monday downgraded Tata Motors’ outlook to negative from positive following a cyber attack on its British arm Jaguar Land Rover which has led to a complete production halt.

Photograph: Rajesh Karkera/Rediff

The rating agency affirmed the Mumbai-based auto major’s Ba1 corporate family rating (CFR).

“The outlook change to negative from positive reflects our view that a full recovery in credit metrics will likely take several months,” said Sweta Patodia, a Moody’s Ratings Assistant Vice President and Analyst.

The cyber incident at JLR highlights the customer relations risk captured under social risk considerations within the ESG framework, and is the key driver of the rating action, she added.

Following the demerger of the company’s commercial vehicle business, which takes effect on October 1, 2025, JLR will contribute more than 90 per cent to its consolidated EBITDA, underscoring the convergence of their credit profiles, Moody’s Ratings stated.

Following the cyber incident, JLR’s operations have been disrupted for the last four weeks, causing a full production halt that will last at least until October 1.

Even after production resumes, it may take several months for operations to return to normal, it stated.

“We estimate that JLR’s production halt will reduce TML’s consolidated EBITDA to around $850 million for the fiscal year ending March 31, 2026 (FY25-26), down from our previous forecasts of around $3 billion.

“Additionally, higher working capital requirements will result in negative cash flow from operations this fiscal year,” Moody’s stated.

Despite the halt, JLR continues to incur weekly cash outflows of around GBP500 million ($675 million) driven by ongoing obligations such as supplier payments and employee wages, it noted.

However, this cash burn is likely to moderate in the coming weeks as supplier payments taper, it added.

Furthermore, the resumption of sales from existing inventory – estimated at around 25,000 vehicles – should help ease working capital pressures over the near term, it stated.

“However, if production remains suspended for an extended period or if the return to normal operations is delayed, the impact on earnings and cash flows could be more severe,” Moody’s said.

Given the negative outlook, an upgrade is unlikely over the next 12-18 months, it said while adding that the outlook could be revised to stable if JLR’s outlook is changed to stable.

In a statement issued on Monday, JLR said it will partially resume manufacturing operations in the coming days.

Tata Motors’ Ba1 CFR continues to reflect the company’s global market presence in the luxury car segment through JLR, its growing market share within the passenger vehicle segment in India as well as the sustained strengthening in its credit profile on the back of debt reduction and earnings expansion, it said.

“TML’s Ba1 rating incorporates our expectation of extraordinary support from its parent Tata Sons that results in a one-notch uplift included in its rating,” it added.