The review, the ratings agency said, is being done to assess whether the potential of support for the group entities from Tata Sons is greater than what the ratings agency previously factored in. This is due to increasing operational and management linkages within the group.
Tata Sons has a record of supporting group entities in events of stress. For instance, the group had earlier provided material extraordinary financial support to entities such as Tata Teleservices and Coastal Gujarat Power, an erstwhile subsidiary of Tata Power which has now been merged with Tata Power.
“We are also undertaking the review because we believe operational integration between Tata Sons and group entities, as well as between group entities, will continue to increase,” S&P said.
The review will also consider Tata Sons’ improving flexibility to provide support, and the group’s more balanced cash flow generation. The market value of some of Tata Sons’ key holdings has increased significantly over the past few years, in line with a material improvement in their financial performance.”Our review will also assess whether the difference in the ratings on Tata Motors and JLR is warranted. This is given the possibility of increasing integration between the two companies,” the ratings agency further noted.S&P intends to resolve the CreditWatch in the next six to eight weeks.The global agency could raise the ratings by at least one notch if it finds that the group status of these companies is higher than the current moderately strategic importance. This would depend on S&P’s view of operational and management linkages, and the strength of expected group support.
“We could affirm the ratings on the six companies if our review concludes that the expected support for the entities is not strong enough to warrant a rating uplift,” it said.