- Indian stock markets this week: BSE Sensex gains 2.4%, L&T, Tata Power shares surgeBSE Sensex continue upward march, advances 158 pts before US Fed decisionPanel suggests foreign VC inflows to be defined as FDIBSE Sensex retreats from highs, top gainer Tata Power, Hero MotoCorp shares fall
India’s Tata Power may sell some investments and raise equity to help reduce debt, a top executive said on Tuesday, as expensive imported coal, below-cost power tariffs and a weak rupee weigh on its earnings.
The company, a unit of the salt-to-steel Tata conglomerate, has bled money from its flagship Mundra plant in western India, unable to pass along the high cost of imported coal to customers, despite a decision by a federal regulator in April paving the way for a tariff increase.
The case has underscored the regulatory uncertainty that plagues the investment climate in Asia’s third-largest economy, in the grip of its worst slowdown in a decade, and the infrastructure sector in particular.
Comparing Mundra’s financial troubles to a cancer eating away at a body, Tata Power executive director S Ramakrishnan told Reuters the company was “mentally and financially” prepared to sustain Mundra’s losses only until the start of March.
Standard & Poor’s last month lowered Tata Power’s long-term credit rating on weak cash flows, saying it could cut the rating again if liquidity weakens further or it faces difficulty in refinancing its debt in a timely manner. The current rating is a sub-investment grade B+.
Ramakrishnan estimated the company’s consolidated debt at about R30,000 crore, or $4.9 billion. A company spokesperson later clarified this, saying the debt was R38,210 crore as of the end of June. About 37% of its debt is in foreign currency.
“We are studying what are the various options available to us to improve the debt-to-equity situation so that the credit rating pressures are lesser,” he said in a phone interview.
“Options include sale of investments, raising of equity — all those are there. They are all under study. No decision has been taken,” he added.