Tata Power steps up efforts to rejig debt, working capital measures

Tata Power, with an ambitious Rs 60,000-crore capital expenditure (capex) plan, has also intensified efforts to change debt structures and pursue other working capital measures to self-finance capex.

As of March 2024, Tata Power’s consolidated debt stood at Rs 49,480 crore.

“The company is making a transition to a larger share of renewable energy capacity. It is an established player in power generation and lenders have comfort with record,” said a senior executive from a public sector bank

He added, “The shift to long-term credit is also a reflection of the interest rate cycle where there is expectation of easing in the coming quarters.” An email query sent to Tata Power remained unanswered.

However, the company, in its latest annual report, noted, “We are actively refinancing / repricing high-cost debt to secure better repayment terms and reduce interest costs.”

The trend is already playing out in the company’s FY24 numbers.

Of the Rs 49,840-crore consolidated debt, 76 per cent is long-term. The share of long term has risen over last year, while that of short term is shrinking (see chart). More of this is expected to continue in FY25.

A recent India Ratings report on Tata Power Renewables, which is a wholly-owned subsidiary of Tata Power, stated that given the changing liquidity scenario, the company is looking at lowering commercial paper exposure. This will be through increasing the use of long-term funds.

In addition to debt restructuring, the company in its annual report, also noted it is accelerating the liquidation of receivables across all business units.

The report further said that to improve working capital management, it is “negotiating extended supplier credit and utilising other trade finance structures. We have improved our credit terms, thereby enhancing cash flow.”

Of the planned Rs 60,000-crore capex, the company aims to spend Rs 15,000-20,000 crore in the current financial year.

Company executives, in a call with analysts in May, also noted, the company is focusing on improving cash flows every year so as to ‘self-fund’ a large part of its capital expenditure.

The executives also said that its focus on receivables, supply chain and inventory management led to a significant reduction in working capital.

“As a result, we have done Rs 12,000-crore capex this year, but our debt levels are almost constant. And, our debt to equity is almost 1x,” the top executive added.