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India's top carmaker can thank China's appetite for a British off-road vehicle brand for the biggest drop in bond risk in the global industry.
Credit-default swaps insuring the debt of Tata Motors for five years slumped 97 basis points, or 0.97 percentage point, this year to 369, as a demand surge in the world's second-largest economy fuelled the biggest profit jump since 2010.
Similar contracts for Fiat fell 90 basis points, according to data provider CMA.
Sales at Tata Motors' Jaguar Land Rover (JLR) unit in China, the world's largest car market, soared 61 per cent last quarter, helping the Indian company tide over a demand slump at home.
The risk the carmaker will renege on debt in the coming 12 months has slumped to 0.09 per cent from 2.5 per cent five years ago, according to Bloomberg's default risk model based on factors including share performance and debt metrics.
"The profitability just keeps surprising positively," Max Warburton, car industry analyst at Sanford C. Bernstein in Singapore, said in an interview last week.
"JLR is generating a huge amount of cash, and the business looks in great health."
The credit market's increased confidence in Tata Motors marks a turnaround from a deterioration after the sudden death of former managing director Karl Slym in January.
Slym, who joined the Indian company from General Motors, died after falling from the 22nd floor of the Shangri-La hotel in Bangkok, in a case that Thai police have said pointed to suicide. The carmaker's default swaps reached an 18-month high in February.
Despite the downturn in domestic business, Tata Motors' strong financial performance, buoyed by its luxury brands Jaguar and Land Rover, may have positively influenced its credit default swaps, the carmaker's Mumbai-based spokeswoman Minari Shah said in an email.
The movement of the gauge may also be "guided by several external factors apart from company-specific factors", she said.
The company's net income more than tripled from a year earlier to 54 billion rupees (HK$6.9 billion) in the April-June period, beating the 37.9 billion rupee median of 34 analysts' estimates.
Deutsche Bank and Credit Suisse raised their share price targets for the maker of the Nano, the world's cheapest car, after the earnings announcement on August 11.
Tata Motors bought JLR from Ford Motor in 2008 for more than US$2 billion.
While sales have risen at the JLR unit, Tata Motors has been grappling with weak demand at home amid India's economic slowdown. Domestic passenger-vehicle deliveries fell 37 per cent last quarter, according to the Society of Indian Automobile Manufacturers. Truck sales dropped 25 per cent.
The company is now stepping up efforts to turn around its local business, unveiling its first new car model in five years this month.
The compact car, called the Zest, was developed to revive profitability at the Indian business as it lost market share to Maruti Suzuki India and the local unit of South Korea's Hyundai Motor.
Tata Motors issued 10-year rupee bonds this month at 9.81 per cent, according to data compiled.
The yield on benchmark AAA-rated five-year local-currency corporate bonds in India declined 28 basis points this year to 9.35 per cent, while that on 10-year government notes dropped 30 basis points to 8.53 per cent.


Land Rover's surging China sales slash bond risk at India's Tata Motors

Tata Motors' vice-president Girish Wagh at last week's launch of the Zest. The compact model carries the carmaker's hopes of reviving a sluggish domestic market. Photo: EPA

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The unit of the Indian carmaker that also includes Jaguar posts 61pc sales jump in key market for quarter, driving down credit-default swaps


India's top carmaker can thank China's appetite for a British off-road vehicle brand for the biggest drop in bond risk in the global industry.


Land Rover's surging China sales slash bond risk at India's Tata Motors

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}The unit of the Indian carmaker that also includes Jaguar posts 61pc sales jump in key market for quarter, driving down credit-default swaps

The unit of the Indian carmaker that also includes Jaguar posts 61pc sales jump in key market for quarter, driving down credit-default swaps