Tata Power jumps after board OKs raising Rs 2600 cr from Tata Sons

Tata Power spurted 7.61% to Rs 49.50 after the company said its board has approved raising Rs 2,600 crore through the issue of preferential shares.

The board of directors of the company approved issuance of 49,05,66,037 equity shares through a preferential issue to the promoter, Tata Sons, at Rs 53 per equity share for an aggregate sum of Rs 2,600 crore, subject to shareholder approvals.

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

The board has also given in-principle approval for setting up of Infrastructure Investment Trust (InvIT) for the company's renewable business on terms and conditions to be discussed with potential investors.

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.

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 for its renewables business; and raising of equity to reduce unsustainable debt in Tata Power and/or its subsidiaries.

Speaking on the fund-raising plan, Praveer Sinha, the chief executive officer (CEO) & managing director (MD) of Tata Power Co., has said that: "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."

Tata Power's consolidated net profit surged 176.7% to Rs 474.70 crore on 8.4% fall in net sales to Rs 6,620.80 crore in Q4 March 2020 over Q4 March 2019.

Tata Power is India's largest integrated power company and, together with its subsidiaries & jointly controlled entities, has an installed/ managed capacity of 12,742 MW.

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