Tata Power looks to use preference share, divestment proceeds to cut debt

After its decision to merge the Mundra subsidiary with itself, Tata Power looks to use preference share and divestment proceeds of Rs 4,000 crore to reduce the unit’s debt.

In an investor presentation on Tuesday, Tata Power said the company aims to sustain net debt below Rs 25,000 crore beyond FY21. It also shared plans to simplify business by reducing the number of entities it currently holds. 

According to Tata Power, the company looks to reduce Coastal Gujarat Power (CGPL)’s debt using “preference and divestment proceeds of Rs 4,000 crore to generate interest cost savings of Rs 380 crore per annum.” CGPL houses the Mundra unit. The power producer also shared plans to deconsolidate debt by sale of more than 50 per cent stake in operational renewable projects, through the infrastructure investment trust (InvIT) structure. 

The InvIT is to be floated in 2021. The presentation added post InvIT. Merger and acquisition opportunities will also be explored.

Tata Power aims to reduce its net debt to less than Rs 25,000 crore by the end of FY20, from Rs 43,578 in FY20. The presentation said Tata Power would look to sustain net debt below Rs 25,000 crore beyond FY21.