Tata Power to raise Rs.2,600 crore through preferential equity, plans InvIT

The Board of Directors of Tata Power has approved issuance of 49,05,66,037 equity shares on a preferential basis to Tata Sons Pvt Ltd for an aggregate consideration of Rs.2,600 crore.

The issue price for the equity shares has been fixed at Rs.53 per equity share representing a 15 per cent premium over the company’s closing market price on July 1, 2020, Tata Power said in a press release.

Tata Sons’ shareholding will increase from 35.27 per cent to 45.21 per cent on allotment of equity shares pursuant to the preferential issue. Consequently, Tata Group’s shareholding will increase from 37.22 per cent to 46.86 per cent.

Tata Power is working on a strategic turnaround plan to strengthen the fundamentals of the company through a mix of divestment and business restructuring that will deleverage the balance sheet and improve the capital structure of the Company. These actions are expected to improve the fundamentals and lead to improvement in long term shareholder value.

Tata Power has also has decided to pursue setting up of InvIT (infrastructure investment trust) for its renewables business.

The long-term strategic plan involves reducing debt thereby strengthening the balance sheet and improving overall return metrics through:

• Divestment of non-core and certain overseas investments
• Restructuring of some of its businesses to unlock value and simplify the structure of the company and its subsidiaries. Consequent to this, the company has decided to pursue setting up of InvIT (infrastructure investment trust) for its renewables business; and
• Raising of equity to reduce unsustainable debt in Tata Power and/or its subsidiaries.

Commenting on the fund raising plan approved by the Board, Praveer Sinha, CEO & MD, Tata Power said, “This equity raise demonstrates the confidence reposed by the Tata Group in the Company’s capabilities and further strengthens the effort to reduce debt & capitalize the Company to invest in future growth. Similarly, the Board’s in-principle approval for setting up of an InvIT, is another important step towards restructuring the renewables business and unlocking value. This along with the divestment of various non-core and overseas assets will help in deleveraging in preparation for an ambitious growth plan over the next decade.”

The promoters of the company are fully supportive of the plan and are willing to back the company. The support of Tata Sons signals their strong conviction in the future prospects of the company. This benefits all shareholders by reducing debt, allowing the business to continue to invest and execute its long-term growth strategy, the release noted.

The Annual General Meeting of the shareholders, wherein the company will seek shareholders’ approval for the preferential issue, will be held on July 30, 2020.

(Featured photograph shows a ground-mounted solar PV plant of Tata Power Solar in Chennai, Tamil Nadu.)