TEXT-S&P ups Tata Motors to 'BB';outlook positive

July 09 -

Overview

-- We expect JLR to sustain its improved operating performance, underpinned by strong sales across geographies.

-- Tata Motors' competitive position and cash flow stability have improved, in our opinion.

-- We are raising our long-term corporate credit rating on India-based Tata Motors to 'BB' from 'BB-'. We are also raising the issue ratings on the company's senior unsecured notes to 'BB' from 'BB-'.

-- The positive outlook reflects our expectation that Tata Motors will sustain its improved operating performance and maintain debt protection measures commensurate with the rating.

Rating Action

On July 9, 2012, Standard & Poor's Ratings Services raised its long-term corporate credit rating on India-based automaker Tata Motors Ltd. to 'BB' from 'BB-'. The outlook is positive. At the same time, we raised the issue ratings on the company's senior unsecured notes to 'BB' from 'BB-'.

Rationale

We upgraded Tata Motors because we believe the company's competitive position and cash flow stability have improved. We assess the company's business risk profile as "fair". Tata Motors' "significant" financial risk profile reflects our expectation that the company's ratio of consolidated debt to EBITDA will be about 2.0x-2.5x in 2013. Our view is based on the improved operating performance of Jaguar Land Rover PLC (JLR; BB-/Positive/--), which is Tata Motors' fully owned U.K. subsidiary. JLR, which accounted for about 60% of Tata Motors' consolidated revenues and two-thirds of its EBITDA in the fiscal year ended March 31, 2012, outperformed our expectations. We expect JLR to sustain the improvement in its operating performance.