Moody's Investors Service today upgraded ratings of half a dozen Tata Group firms, including TCS and Tata Motors , on account of Tata Sons' track record in providing timely support to these firms.
The agency upgraded corporate family ratings of Tata Motors to Ba2/Stable from Ba3/Stable, Tata Chemicals ' to Ba1/Stable from Ba2/Stable, Tata Steel's to Ba2 from Ba3, Tata Steel UK Holdings' to B2 from B3, Tata Power's to Ba3/Stable from B1/Negative and affirmed Tata Consultancy Services' local currency issuer rating at A3/Stable.
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"The ratings of Jaguar Land Rover Automotive plc and Tata Chemicals North America Inc. have not been affected by today's rating actions," Moody's Investors Service said in a statement.
Upward ratings' revision reflects agency's expectation of parental and systemic support in case of need, which has been exhibited both in the form of extraordinary financial support from Tata Sons, the ultimate parent, and ongoing support through their close association with the Tata brand, Moddy's Investors Service said.
"Multiple rating actions are based on the track record of Tata Sons in providing timely support to investee companies and Moody's assessment of its ability to provide future support and on the need to protect the brand reputation of Tata from the consequences of an entity's distress," it said.
Tata Sons' has been injecting money, typically through equity rights issues, into its companies, to fund their growth plans or to bolster any weak balance sheets. "As Tata's involvement in consumer facing businesses in India increases, coupled with its growing international presence, the Tata name, with more than 100 years of history, has become a globally significant brand and is, therefore, critical to maintain the Group's standing with customers, employees and investors alike," said Alan Greene, a Moody's Vice President, Senior Credit Officer.
Greene, who is the Lead Analyst for all Tata companies, with the exception of Tata Power, said dividends paid by TCS, a 73.7 per cent owned subsidiary, are the predominant source of funds for Tata Sons.
"While we believe that support from Tata Sons is ultimately available to the operating companies, it is beholden on the companies themselves to run sustainable balance sheets and contain any losses," Greene added.
Over the last three years while the four core rated Tata companies together have performed modestly against a backdrop of slower economic growth in India and losses in certain large overseas subsidiaries and domestic project vehicles, Tata Sons has provided timely support and thus confidence to fellow shareholders and lenders, Moody's Investor Services said.
"With glimpses of recovery in some of the worst affected sectors of the Indian economy, bulk of Tata Sons' disbursals can now be directed into the group's growth areas and not into
resolving old troubles," Greene said.
TCS stock price
On September 18, 2014, Tata Consultancy Services closed at Rs 2636.65, up Rs 48.20, or 1.86 percent. The 52-week high of the share was Rs 2667.00 and the 52-week low was Rs 1911.10.
The company's trailing 12-month (TTM) EPS was at Rs 102.67 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 25.68. The latest book value of the company is Rs 224.90 per share. At current value, the price-to-book value of the company is 11.72.
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