While Tata Power earlier sought to defer its loan repayments under a debt servicing moratorium allowed by the RBI, it later found a better option in the central bank’s LTRO funding scheme, dropping the idea of taking a moratorium on its loan repayments.
While Tata Power earlier sought to defer its loan repayments under a debt servicing moratorium allowed by the RBI, it later found a better option in the central bank’s LTRO funding scheme, dropping the idea of taking a moratorium on its loan repayments. On the contrary, Tata Power has now hastened the debt repayment after the coronavirus pandemic reshaped situations. Calling the moratorium a “precautionary measure against the worst case scenarios”, Ramesh Subramanyam, the company’s Chief Financial Officer & President, Fuel & Logistics, said that after the government’s initiatives to ease the liquidity pressure of various stakeholders in the power sector, Tata Power and subsidiaries “do not foresee continuation of the need to seek the moratorium on debt servicing.”
For Tata Power, it was more prudent to conserve cash after the Ministry of Power (MoP)’s guidelines which provided an option to distribution companies to take a moratorium of three months payments to electricity generating companies. However, the government later made announcements to ease liquidity pressures, and Tata Power also managed to secure funding under the LTRO scheme.
Under LTRO or Long Term Repo Operation (LTRO), central banks such as the Reserve Bank of India can lend money to banks for longer durations of 1-3 years at prevailing repo rate, as opposed to the overnight lending under regular repo operations. This also allows banks to loan money to companies as they get more liquidity.
The LTRO funding will help Tata Power to “manage our working capital needs better in case the distribution companies delay payments beyond normal periods,” Ramesh Subramanyam said. Subsequently, Tata Power and its subsidiaries withdrew requests for availing moratorium. The company is now right on track to repay its debt obligations for the month of April 2020. Tata power had an outstanding debt of Rs 45,000 crore at the end of December.
Regarding Tata Power’s divestment plans, Ramesh Subramanyam said that while the coronavirus situation has made negotiations difficult, the disinvestment plans still remain on track. Tata Power has already secured funding from Cennergi sale and is also trying to secure transaction for another overseas asset. “We closed Cennergi transaction earlier in April with Rs 700 crore realized from this sale. We are in advanced discussions to execute sale agreement for another overseas asset. Besides we are working on closing the sale of Defense business in this quarter and expect to complete sale of our investment in Zambia hydro project by September,” Ramesh Subramanyam said. The company now hopes to achieve its divestment target this year itself.