"The profitability of Tata Motors' passenger car business depends on its ability to sell significant volumes of its new Zest and Bolt models," Moody's said in a statement.
The company has Ba3 stable rating from the agency.
"If TML sells at least 15,000 units a month of the Zest and the Bolt combined, its market share of the passenger car segment would be about 10 percent and re-establish the standing of the car business," Moody's vice-president and senior credit officer Alan Greene said.
"Such a sales figure would be a phenomenal turnaround for the company. It sold an average of 6,300 cars a month in the first four months of the fiscal year," he added.
Tata Motors, this Tuesday launched its first car in four years, in a bid to regain market share and plug losses in its domestic business. The Zest is priced at Rs 4.6 lakh and above and is available in diesel and petrol variants.
The compact sedan Zest competes with the established brands like Maruti D'zire, Honda Amaze and Hyundai Xcent. The company plans to launch the hatchback Bolt by the end of the year.
On the companys credit profile, the agency sees the company demonstrating weaker consolidated credit metrics this fiscal, but does not see any downgrade as it global arm JLR looks to continue to report strong set of numbers, helping to retain the current high rating level.
JLR revenue rose 31 percent to 5.4 billion pounds, while Ebitda jumped 68 percent to 1.1 billion pounds in the June quarter, helping the parent report the best ever net income growth in the past nine quarters which rose nearly fourfold to Rs 5,398.21 crore for the three months to June.
Strong JLR sales helped boost the company's overall margins by a massive 550 bps to 20.3 per cent from 15.8 per cent a year ago, while margins at the domestic operations fell to minus 2.8 per cent from 2.3 per cent. Revenue from JLR jumped 54 per cent to Rs 54,425.97 crore.
On the other hand, revenue from Tata and other brand vehicles and financing during the quarter were at Rs 9,898.38 crore, down 11.33 per cent. JLR paid 150 million pounds dividend to the parent during the quarter. The domestic unit or the parent, has nearly halved net profit to Rs 394 crore, from Rs 703 crore a year ago, as sales have been on the decline for many quarters.
By the domestic arm recorded another very weak quarter during in the June period, with revenue falling 15 percent to Rs 7710 crore, and an Ebitda loss of Rs 220 crore from a gain of Rs 210 crore.
Moody's further said that JLR's strong ability to generate cash offers funding flexibility to the group, circumventing the parent's limited ability to incur additional debt. At the end of the June quarters, JLR's net cash position totaled 1.3 billion pounds.
But the agency warned that it expects the groups liquidity to deteriorate during the fiscal as JLR is investing around 3.7 billion pounds this fiscal up from 2.7 billion pounds last fiscal.