Tata Power to raise Rs 2,600 crore from Tata Sons to de-leverage its balance sheet

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Published: July 3, 2020 12:45 AM

Tata Power is also teaming up with Tata Motors and other automakers to build charging stations for electric vehicles and hopes to grow the business from nine cities.

Tata Power is currently in the process of diversifying its revenue sources.

Tata Sons will infuse Rs 2,600 crore into Tata Power to help the power generator de-leverage its balance sheet. The board of Tata Power on Thursday approved a preferential issue at Rs 53 per equity share, 15% higher than Wednesday’s closing price, which will increase the promoter’s shareholding by around 10 percentage points to 45.21%

The board also approved, in-principle, an infrastructure investment trust (InvIT) from the company’s renewable energy portfolio. Tata Power shares closed at Rs 49.85 on the BSE, on Thursday, up 8.4% from a day ago.

The development comes at a time when Tata Power is taking a number of steps to reduce its borrowings, which stood at Rs 43,578 crore in March, 2020. According to industry analysts, the renewable energy InvIT has the potential to reduce the company’s debt by more than Rs 16,000 crore.

The entire renewable energy portfolio will be housed in Tata Power Renewable Energy and the new structure is expected to be finalised by the end of Q2FY20. “The board’s in-principle approval for setting up of an InvIT, is another important step towards restructuring the renewables business and unlocking value,” Praveer Sinha, CEO and MD of Tata Power, said.

The bulk of Tata Power’s debt reduction is being driven by the sale of the non-core assets. It received $112 million from the sale of South Africa’s Cennergi power plant in April, which will be used to repay loans. The firm has also signed definitive agreements with Germany’s Oldendorff Carriers for selling three ships at a consideration of $212.8 million. Tata Power has sold its defence arm to a group company and is also planning to exit the power business in Zambia. “However, the biggest deleveraging is likely to be driven by the separation of renewable assets,” analysts at HSBC Securities had recently noted.

Tata Power is currently in the process of diversifying its revenue sources and expects renewables and the customer-oriented business — distribution, rooftop solar, micro-grid and solar pumps, home automation and electric vehicle (EV) charging — to contribute about half the company’s revenues in the next five years. Tata Power Solar, the company’s solar module manufacturing arm, has also received module supply contracts worth Rs 3,500 crore from NTPC in FY20.

Tata Power is also teaming up with Tata Motors and other automakers to build charging stations for electric vehicles and hopes to grow the business from nine cities. Recently, it partnered with Jaguar Land Rover India for end-to-end charging solutions for the latter’s range of electrified vehicles to be launched in India. In collaboration with the Rockefeller Foundation in Q3FY20, Tata Power launched the TP Renewable Microgrid Ltd to set up 10,000 micro grids over the next six years.

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