Tata firms’ ratings benefit due to Tata Sons, despite board reshuffle: Moody’s

Moody’s says that it does not expect any change in the operating and long-term strategy of the Tata companies


In Moody’s view, it is business as usual at the rated Tata companies, which are listed entities, despite the leadership change. Photo: Bloomberg
In Moody’s view, it is business as usual at the rated Tata companies, which are listed entities, despite the leadership change. Photo: Bloomberg

Mumbai: Moody’s Investors Service, the credit rating firm, on Wednesday said the ratings of four Tata Group operating companies continue to benefit from an uplift from the group’s main holding company, Tata Sons, despite the conglomerate’s ongoing board tussle.

“We expect that Tata Sons can continue to extend support to its key operating companies, should the need arise, owing to its substantial cash holdings and the significant value of its listed equity investments, and despite an ongoing boardroom reshuffle,” said Kaustubh Chaubal, a Moody’s vice-president and senior analyst in a statement.

Moody’s affirmation in Tata companies comes a day after Standard & Poor’s statement where it said even though some decisions are likely be delayed in the operating companies owing to the ongoing tussle at the board level, yet the fact that most of the companies are professionally managed, hold them in good stead. 

Tata Sons and its ousted chairman Cyrus P. Mistry have been locked in a bitter dispute for over a month to seek control. 

With Mistry challenging his eviction and refusing to step down, the operating companies have called for an extraordinary general meeting to seek his removal.

Moody’s said, the ratings of the group’s four operating companies—Tata Motors Ltd (Ba1 stable), Tata Chemicals Ltd (Ba1 stable), Tata Steel Ltd (Ba3 negative) and Tata Power Co. Ltd (Ba3 negative)—will continue to include a one-notch uplift, based on Moody’s assessment of support for the companies from Tata Sons, in times of need.

As for Tata Consultancy Services Ltd (A3 stable), Tata Group’s flagship subsidiary, the company’s rating reflects its intrinsic credit strength. 

In Moody’s view, it is business as usual at the rated Tata companies, which are listed entities, despite the leadership change. 

Moody’s says that it does not expect any change in the operating and long-term strategy of the Tata companies.

“Nonetheless, any change in group strategy or in the strategy of the operating companies, which in our view increases their risk appetite, could exert pressure on the Tata companies’ ratings,” said Chaubal. 

Moody’s also believes that a change in Tata Sons’ support policy for its group companies could also impact the Tata Group operating companies’ ratings.

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