Tata Motors stock gains on Moody’s positive outlook post-demerger

The global rating agency also said all Tata Motors’ businesses should continue to deliver growth, irrespective of the demerger with an emphasis on attaining net-zero debt by March 2025

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Shares of Tata Motors Limited advanced over a percent to Rs 1,028 in the morning trade on March 7 after Moody’s affirmed the automobile major’s BA3 ratings with positive outlook.

The development comes just days after the country’s largest electric vehicle manufacturer announced the decision to split the commercial vehicle (CV) and passenger vehicle (PV) business into two listed entities.

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“While the demerger would result in TML’s remaining operations comprising only CVs, the company’s strong foothold with about 40 percent share in India’s growing CV industry and the business’ demonstrated ability in generating large free cash flow through industry cycles will support its credit profile,” said Kaustubh Chaubal a Moody’s Senior Vice President.

Also read: Demerger to help unlock value of Tata Motors’ passenger car division: Experts

The global rating agency also said that all Tata Motors’ businesses should continue to deliver growth, irrespective of the demerger with an emphasis on attaining net-zero debt by March 2025.

The demerger, likely to materialise over the next 12-15 months, has prompted bullish calls from various analysts. Brokerage JP Morgan assigned an “overweight” rating to the stock and a price target of Rs 1,000.

Morgan Stanley said the decision to demerge the business into two listed entities reflects the company’s confidence in the PV segment being self-sustaining and could lead to better value-creation for Tata Motors. The brokerage has assigned a target price of Rs 1,013.

Nomura has a “buy” call and a target price of Rs 1,057. “In the medium term, the businesses should be able to pursue their respective strategies with greater freedom,” it said in a note.

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