Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA+/Stable/Crisil A1+’ ratings on the bank facilities and debt instruments transferred from erstwhile Tata Motors Passenger Vehicles Ltd (TMPVL; amalgamated with Tata Motors Ltd) while reaffirming the ratings on existing debt instruments of Tata Motors Ltd (TML; renamed to Tata Motors Passenger Vehicles Ltd; part of the Tata group). 

 

Crisil Ratings has also withdrawn its rating on Rs 1000 crore short-term debt, reduced the bank facilities quantum by Rs 6400 crore and commercial paper by Rs 5000 crore on account of these getting transferred to TML Commercial Vehicles (TMLCV; 'Crisil AA+/Stable/Crisil A1+') following the demerger of the commercial vehicle (CV) business basis NCLT order.

 

The ratings action follows the completion of merger of TMPVL with TML through the National Company Law Tribunal (NCLT) scheme of arrangement. Accordingly, TMPVL has amalgamated with TML with effect from October 1, 2025. Pursuant to the completion of the transaction, TMPVL ceased to exist. Further effective October 1, 2025, the CV business along with its related subsidiaries and joint ventures (JVs) has moved to TMLCV, a separate entity.

 

The business risk profile continues to be supported by the healthy market share of domestic passenger vehicle (PV) business at 12.3% in the first quarter of fiscal 2026 (13.2% in fiscal 2025; 13.9% in fiscal 2024), leadership position in electric vehicle (EV) business with healthy market share of ~37% in the first quarter of fiscal 2026 (~55% in fiscal 2025) and healthy performance of JLR in fiscal 2025. The wholesale volumes of domestic PV business remained healthy at 2.7 lacs in the first half of fiscal 2026 (2.7 lakh in the corresponding period of the previous fiscal) while EV sales increased by 27% to 41,000 over the same period. JLR which reported healthy wholesales of 401,000 in fiscal 2025 (401,000 in fiscal 2024) got moderately impacted in first quarter of fiscal 2026 by the temporary pause in shipment following imposition of 25% tariff on all imported passenger vehicles by US. The same has now been largely resolved with a trade deal between US and UK wherein the first 100,000 vehicles imported from UK will be subject to a lower tariff of 10%. Similarly, September 2025, U.S. has reduced its tariff on auto imports from the European Union to 15%, effective retrospectively from August 1, 2025. However, the recent cyber incident reported by JLR is likely to significantly impact the sales volumes for the second and third quarters of the current fiscal withy with anticipated recovery by fourth quarter of fiscal 2026 as per Crisil Ratings estimates. The incident led to a complete shutdown of its system disrupting production and other activities across locations.

 

However, manufacturing has resumed in a phased manner from October 8, 2025 starting with engine production plant in Wolverhampton, London to be followed by operations in Nitra, Slovakia and Solihull, England. This shut down will result in significant loss in terms of revenue and profitability given the high operating leverage in the business. Crisil Ratings estimates production to ramp up by the end of the third quarter of the current fiscal and continue at normal levels from the last quarter onwards.

JLR generated positive free cash flow of £1.5billion in fiscal 2025 and £2.3 billion in fiscal 2024 leading to significant deleveraging and reported net cash position of ~Rs. 3200 crores at the end of fiscal 2025. The company has sufficient liquidity to manage its short-to-medium-sized debt obligations as well as working capital limits. The company had available liquidity of Rs. 390 billion (£ 3.3 billion) at end of Q1FY26 along with undrawn revolving credit facility of Rs. 195 billion (£ 1.7 billion). JLR has adequate bank lines to manage its working capital.

 

While Crisil Ratings estimates the adjusted net leverage to see moderation exceeding 1 time for fiscal 2026, the same is expected to come down with normal operations expected fiscal 2027 onwards. Any significant delays in ramp up of production for JLR or decline in retail sales will remain monitorable.

 

The current ratings continue to reflect the strong legacy of JLR in the global luxury automotive (auto) market,  healthy market position in the PV segment, leadership position in the EV segment and strong financial support from the Tata group, specifically Tata Sons, given its strategic importance, thereby lending significant financial flexibility. These strengths are partially offset by exposure to intense competition in the global luxury auto sector and inherent cyclicality in the domestic PV business.

Analytical Approach

Crisil Ratings has combined the business risk profiles of TML and its subsidiaries, including JLR and its JV, Chery Jaguar Land Rover Automotive Co Ltd, in proportion to their shareholding.

 

Crisil Ratings has applied its group notch-up framework to factor in the extent of support available from the Tata group.

 

To arrive at the adjusted net debt, Crisil Ratings reduced the surplus cash of TML. Surplus cash is defined as cash & equivalents exceeding Rs 5,000 crore, which may be required for regular operations of JLR and domestic business.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths 

Strong legacy in the global luxury auto segment

Jaguar and Land Rover are iconic brands with a rich heritage in the premium luxury segment. JLR’s product development capabilities enabled successful launches and expansion into new segments, thus enhancing the product portfolio. The Land Rover segment contributed over 93% to the overall sales of JLR in fiscal 2025, with Defender, Range Rover and Range Rover Sport continuing to gain momentum. While Jaguar has been a drag on profitability, the company has been looking to modernize the brand, scale down loss-making sedans and make it all-electric from 2026. With frequent refreshes and special editions in the Land Rover segment, TML is likely to maintain its niche position in the global auto market.

 

Leadership position in passenger EV segment and healthy market position in domestic PV

The company has seen significant turnaround in operations, led by new product launches, product re-engineering and footprint expansion, leading to increased reliability and acceptance among customers. In fiscal 2025, market share was ~13.2% (13.9% in fiscal 2024). The operating margin for fiscal 2025 improved by 40 basis points [bps] to 6.9% (6.5% in fiscal 2024) on account of reducing losses in the EV segment along with PLI benefit of Rs 352 crore (Rs 102 crore received for fiscal 2024; Rs 250 accrued for fiscal 2025). Excluding EV sales, PV internal combustion engine business margin saw some moderation on account of lower volumes. The overall PV business margin should remain largely stable in fiscal 2026 due to likely increase in sales of the margin-dilutive EV business. The sustenance of margins and market share through cost reduction efforts and new product launches with expectation of rising mix of margin-dilutive EVs will remain monitorable.
 

TML benefits from early-mover advantage in the EV business, wherein market share was ~55% in fiscal 2025 (~73.1% in fiscal 2024; 83.9% in fiscal 2023). While the market share is likely to moderate with increased competition, rising volumes and higher penetration of EVs will support the market position and drive improved profitability.
 

Strong financial support from the Tata group
TML is one of the flagship companies of the Tata group. The group chairman, Mr. N Chandrasekaran, also chairs its board. Given its strategic importance, the company derives strong financial support from the Tata group through its holding company, Tata Sons. This is reflected in several instances of support over the years, including the Rs 6,500 crore infusion in fiscals 2019 and 2020, which increased the promoter stake to 45.82% in January 2021 from 38.37% in March 2019. The current promotor group holding in TML is 42.57% post DVR cancellation. As part of the group, TML derives significant financial flexibility and access to low-cost funds from banks and capital markets.
 

Tata Sons is also investing in its wholly owned subsidiary, Agratas Energy Storage Solutions Pvt Ltd (Agratas), to develop battery cells with factories planned in the UK and India. While the domestic EV business and JLR will be the anchor customers, there will be no recourse to them for the debt obligation of Agratas.

Key Rating Drivers - Weaknesses 

Competition in the global luxury car segment and capital-intensive nature of business

JLR is exposed to competition from bigger and established brands such as Mercedes, BMW, Daimler and Volkswagen. JLR, with its niche presence in premium sport utility vehicles (SUVs), has a small market share in the world luxury car segment. The auto business requires large capital expenditure (capex), with steady product launches and investment in technology. The global auto industry is rapidly evolving, with higher regulatory focus on emission norms and transition to EVs. Moreover, consumer preference is shifting towards new technologies such as connected cars and autonomous driving, which will require substantial investment in new technologies, regulatory compliance and electrification drive. The ability to sustain successful product launches and meet regulatory norms, while keeping capex in check, will be crucial.

 

Inherent cyclicality of the domestic PV business as well as competitive pressure

The domestic auto industry is inherently cyclical with linkages to economic activity. TML is looking to mitigate the cyclicality by increasing the share of exports, working on residual values, filling in the white spaces through product launches and increasing the penetration of spares and services. Further, the company has passed on the full benefit of GST reduction to customers in September 2025 with price reduction across portfolio which is expected to boost demand.

 

Competition in the Indian PV market has intensified with players launching new models regularly, especially in the compact and mid-size SUV segments. With more players and models vying for a share of the growing pie, price competition has intensified. Although the company has gained healthy market share in the past two fiscals, it remains susceptible to competition from peers and the macro environment.

Liquidity Strong

The liquidity profile remains strong with available liquidity of Rs 390 billion with JLR and Rs. 65 billion with domestic PV business as on June 30, 2025. Further, the company has access to undrawn revolving credit facility of Rs 195 billion with JLR and unutilised fund-based working capital limits of Rs 18 billion with domestic PV business as on September 30, 2025.
 

Capex, including research and development (R&D) expenses of Rs 40,000-45,000 crore annually in fiscals 2026 and 2027, is expected to be funded through internal accrual and cash balance.
 

Additionally, liquidity remains supported by strong financial flexibility, being a part of the Tata group.

 

ESG Profile

The environment, social, and governance (ESG) profile of TML supports its strong credit risk profile.

 

The auto sector has a significant impact on the environment because of the high greenhouse gas (GHG) emissions of its core operations as well as products. The sector also has a substantial social impact because of its large workforce across own operations and value chain partners, and focus on innovation and product development. TML has continuously focused on mitigating its environmental and social risks.

 

TML’s key ESG highlights:

 

• For its Indian operations, TML plans to achieve net zero GHG emissions in its PV businesses by 2040. It also plans to use 100% renewable electricity for its Indian operations by 2030.
• JLR has set a target to achieve net zero GHG emissions across its supply chain, products and operations by 2039. In this light, it is looking to electrify product portfolio and is working with value chain partners to decarbonise the supply chain. Further, it has set targets based on the SBTi principles to achieve 60% reduction in downstream emissions per vehicle kilometer across the entire use phase of vehicles it produces.
• For the domestic business, lost time injury frequency rate for employees decreased to 0.13 time in fiscal 2025 from 0.27 time in fiscal 2024.
• For the domestic business, women comprised ~11% of the total workforce, and attrition rate stood at ~7% in fiscal 2025.
• Governance structure is characterised by ~78% of its board being independent directors, ~33% woman board directors, split in chairperson and executive director positions, and extensive financial disclosures as of March 2025.

 

There is growing importance of ESG among investors and lenders. The company’s commitment to ESG principles will play a key role in enhancing stakeholder confidence, given its high share of market borrowings in its overall debt and access to both domestic and foreign capital markets.

Outlook Stable

TML should continue to benefit from its high sales volume, improved profitability in JLR, and better mix and cost-control measures in the near term. Post demerger of CV business, financial risk profile is expected to remain robust, with healthy sales volume and operating margin in JLR and domestic PV businesses.

Rating sensitivity factors

Upward Factors

• Ability to maintain operating performance for the JLR business on a sustained basis, resulting in steady operating margin and healthy FCF
• Improvement in financial risk profile with adjusted net debt-free status on a sustained basis.

 

Downward Factors

• Weakening of operating profitability owing to decline in volume, leading to a fall in operating margin
• Higher-than-expected debt-funded capex or any significant debt-funded acquisition moderating the financial risk profile
• Net adjusted debt to earnings before interest, tax, depreciation and amortisation (Ebitda) ratio exceeding 1 time on a sustained basis.

About the Company

TML, part of Tata Motors group, is a wholly integrated auto company, engaged in manufacturing of PVs, SUVs, and CVs. In June 2008, the company acquired JLR, which specialises in manufacturing premium cars, and Land Rover, specialising in premium SUVs. The PV unit was hived off into a separate subsidiary effective January 2022 and passenger electric mobility business is housed in a separate subsidiary, Tata Passenger Electric Mobility Ltd (TPEML). Effective October 1, 2025, the commercial vehicles business has been demerged into a separate entity while TMPVL has been merged with TML.

Key Financial Indicators

Particulars	Unit	2025#	2024**
Revenue	Rs crore	362665	434016
Profit after tax (PAT)	Rs crore	19724	32453
PAT margin	%	5.4	7.47
Interest coverage	Times	15.3	7.99
Net debt/tangible networth*	Times	N.M.	0.47

*The company is net debt free as on March 31, 2025

#Proforma PV + JLR financials;

**includes commercial vehicles business demerged effective October 1, 2025

Any other information: Not applicable