The cyber incident at JLR has highlighted customer relations risk under social considerations in the ESG framework, which Moody’s said was the main reason for its rating action.
New Delhi: Moody’s Ratings on Monday downgraded Tata Motors’ outlook to negative from positive after a cyber-attack at its British arm Jaguar Land Rover (JLR) forced a complete production halt.
The rating agency, however, affirmed Tata Motors’ 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, Assistant Vice President and Analyst at Moody’s Ratings.
The cyber incident at JLR has highlighted customer relations risk under social considerations in the ESG framework, which Moody’s said was the main reason for its rating action.
After the demerger of Tata Motors’ commercial vehicle business on October 1, JLR will account for more than 90 per cent of its consolidated earnings before interest, tax, depreciation and amortisation (EBITDA), showing the strong link between the two companies’ credit profiles.
Moody’s estimates that JLR’s production halt will reduce Tata Motors’ consolidated EBITDA to around $850 million for the fiscal year ending March 2026, down sharply from its earlier projection of about $3 billion.
The agency also expects higher working capital requirements to push the company into negative cash flow from operations this year.
Tata Motors Ltd.-owned Jaguar Land Rover is raising £2 billion ($2.7 billion) loan from global banks as the luxury carmaker seeks to ease the financial strain of a cyberattack that forced it to halt production, according to people familiar with the matter.
The foreign currency facility will be priced at about 110 basis points over the secured overnight funding rate, or SOFR, the people said asking not to be identified because the discussions are private. Citigroup Inc., Mitsubishi UFJ Financial Group and Standard Chartered Bank Plc have agreed to offer the 18-month credit facility to the carmaker, the people said, adding that the debt may be syndicated to more banks later.The fund raise, that was reported by the Economic Times earlier on Monday, is expected to show JLR has liquidity to tide over revenue losses.
A JLR spokesperson declined to comment on the efforts to raise emergency funds. Representatives for Citigroup, MUFG and Standard Chartered also declined to comment.
Automotive suppliers typically operate on thin margins and need high working capital, leaving them vulnerable to prolonged disruptions after unexpected events such as the cyberattack confronting JLR. The funding requirement comes months after the luxury carmaker achieved its goal of becoming debt free on a net basis and will help the company normalize operations.This stopgap financing is besides a £1.5 billion loan guarantee from the UK government that can help bolster its cash reserves and support its supply chain hit by the cyberattack-led shutdown.
JLR is grappling with the fallout from a hack that’s crippled operations at the UK’s largest carmaker and sparked chaos across the country’s auto supply chain. Plants in the UK, Slovakia, Brazil and India have been out of action since the start of the month, while some vendors are awaiting payments as JLR tries to clear a backlog of payments it owes to suppliers.
The company said last week that some of its systems were back online, enabling it to work through supplier invoices, accelerate parts distribution to dealers and speed up vehicle sales and registrations. It aims to restart some manufacturing operations on Oct. 1, although it warned it will take some time before it can return to full speed.
Despite production being halted, JLR is still incurring weekly cash outflows of nearly GBP 500 million ($675 million), covering supplier payments and employee wages.
Moody’s said this cash burn is likely to slow in the coming weeks as supplier payments reduce.
The agency added that JLR’s sales from its existing inventory of around 25,000 vehicles should help ease some of the near-term working capital pressure.
However, it warned that if the production suspension lasts longer or the return to normal operations is delayed, the impact on earnings and cash flows could worsen.
With the negative outlook, Moody’s said an upgrade is unlikely over the next 12–18 months. The outlook could be revised to stable if JLR’s own outlook improves.
Meanwhile, JLR in a statement said it will partially resume manufacturing operations in the coming days.
IANS