Tata Motors Passenger Vehicles shares in focus: S&P Global revises outlook to negative; all you need to know

Additionally, the global ratings agency lowered the long-term issue rating on the senior unsecured notes issued by TML Holdings to 'BBB-' from 'BBB'.

S&P Global added that the negative outlook reflects its view that a recovery from the operational disruption following a cyber incident at JLR could be prolonged, leading to Tata Motors' PVs' credit metrics remaining weaker for longer.

The ratings agency said it expects cash flow at Tata Motors Passenger Vehicles Ltd. (Tata Motors PVs; formerly known as Tata Motors Ltd.) to be significantly lower due to a prolonged operational disruption at its wholly owned subsidiary, Jaguar Land Rover Automotive PLC (JLR).

JLR has since resumed production and is gradually ramping up. Post the demerger of the commercial vehicle operations, JLR accounts for more than 80% of Tata Motors PVs' earnings.

S&P Global Ratings said in its press release that it estimates revenue will decline 15%-18%, to about £24 billion in fiscal 2026 (ending March 31, 2026). JLR's profitability will also take a hit because its investment intensity will remain steady. The company's S&P Global Ratings-adjusted EBITDA margins will decline to 3%-5% in fiscal 2026, from 7.6% in fiscal 2025.

"The cyberattack, which began on August 31, 2025, has materially hampered JLR's operations. Production was completely halted throughout September and the first week of October. JLR recently reported that the groupwide system shutdown drove down wholesale and retail volumes in the September 2025 quarter by 24.2% and 17.1%, respectively, versus the same period a year ago," the press release said.

The impact of JLR's loss of volumes is more pronounced post the demerger. "We previously expected that the demerger of the commercial vehicles business would be neutral to our rating on Tata Motors PVs. We estimated the company's net debt-to-EBITDA ratio at about 1.0x at the time of the demerger. However, given the subsequent cyberattack at JLR since our forecast and the subsequent loss of revenue, we now project Tata Motors PVs' ratio of S&P Global Ratings-adjusted net debt to EBITDA will trend closer to 2.5x-3.0x in fiscals 2026 and 2027," S&P Global Ratings said.

Its ratio of funds from operations (FFO) to debt is also likely to weaken to 15%-25% in fiscal 2026 and 2027 (pro forma the demerger), from more than 100% in fiscal 2025. JLR will account for more than 80% of Tata Motors PVs' earnings going forward, in our assessment, with the remainder being passenger vehicle sales primarily in India under the Tata brand.

Tata Motors demerged its commercial vehicles business into a separate legal entity, TML Commercial Vehicles Ltd., with effect from Oct. 1, 2025. Commercial vehicles previously accounted for 15%-20% of revenue and up to 15% of the reported EBITDA of the parent group. The segment generated higher returns on capital than other divisions and carried low leverage, it added.

Path to recovery remains uncertain

The global ratings agency added that a recovery in JLR's earnings is subject to a series of uncertainties, both related to market conditions and to the consequences of the cyberattack. While JLR has resumed production operations, the ramp-up to full capacity will likely be gradual.

"Nonetheless, there could still be some permanent loss of production volume. This, in conjunction with U.S. tariff-related headwinds and a potential delay in key product launches, could pose further downside risks. Also, such risks would intensify if rising sales volumes in other regions are not enough to offset prolonged weakness in China," the ratings agency said.

Tata Motors PVs' credit metrics are likely to be stronger than those of JLR

S&P Global added that it believes Tata Motors PVs' India passenger vehicle business will generate sufficient cash flow to fund its investments of up to ₹60 billion annually, with limited dependence on external debt over the next two years. This, alongside a recovery in JLR's operations, will drive an improvement in Tata Motors PVs' FFO-to-debt ratio toward 40% by fiscal 2028.