Tata Power Board Approves Rs 2600 Cr Equity Raise, InvIT for RE Business

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The Tata Power Board has approved the issuance of 49,05,66,037 Equity shares to Tata Sons for an aggregate consideration of Rs 2,600 crore.

The Board of Directors of Tata Power has approved the issuance of 49,05,66,037 Equity shares on a preferential basis to Tata Sons 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 percent premium to yesterday’s closing price.

On completion, Tata Sons’ shareholding will increase from 35.27 percent to 45.21 percent on the allotment of Equity shares pursuant to the preferential issue. Consequently, Tata Group’s shareholding will increase from 37.22 percent to 46.86 percent.

The company has announced that it 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 an improvement in long term shareholder value.

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

a) Divestment of non-core and certain overseas investments;

b) 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

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c) Raising of equity to reduce unsustainable debt in Tata Power and/or its subsidiaries.

Commenting on the fundraising 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 and 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.”