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    Tata Power board OKs share issue to Tata Sons, InvIt for renewable units

    Synopsis

    The board of the company approved the issue of over 49 crore shares to promoter.

    Tata Power
    The board also gave an in-principle approval for setting up of InvIT for the company’s renewable business on terms and conditions to be discussed with potential investors.
    Mumbai: Tata Power Company plans to raise Rs 2,600 crore through preferential issue of shares and set up an infrastructure investment trust for its renewable energy assets as a part of its strategy to reduce debt and deleveraging the balance sheet of the company.

    The board of the company approved the issue of over 49 crore shares to promoter, Tata Sons Private at Rs 53 a share, which is a 15% premium to the previous close. Consequently, Tata Group’s shareholding will increase from 37.22% to 46.86%. Reacting to the news, shares power rose over 8% to Rs 49.85 on the Bombay Stock Exchange on Thursday.

    “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,” said Praveer Sinha, chief executive officer and managing director.

    The board also gave an in-principle approval for setting up of InvIT for the company’s renewable business on terms and conditions to be discussed with potential investors.

    “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,” Sinha said.

    Tata Power Company hopes to raise about Rs 3,000 crore from divestment of non-core operations and restructuring the renewable energy business with an aim to cut debt by at around 40% to Rs 25,000 crore this financial year, Sinha had told ET in an interview published on June 2. This sale of ships is a part of this plan. The company has reduced its debt-to-equity ratio from 2.19 to 1.99 in FY20 and aims to reduce it to below 1.5 in FY21.

    Tata Power is working on a strategic turnaround plan to strengthen the fundamentals of the company through divestment and business restructuring that will deleverage the balance sheet and improve the capital structure. The company’s long-term strategic plan is to divest non-core and certain overseas investments, restructure some of its businesses to unlock value and simplify the structure of the company, and raise equity to reduce unsustainable debt in Tata Power and its subsidiaries.

    “This benefits all shareholders by reducing debt, allowing the business to continue to invest and execute its long-term growth strategy,” the company said, referring to its long-term strategy. The company will seek shareholders approval on July 30 at its annual general meet.

    Tata Power, along with subsidiaries and jointly controlled entities, has an installed capacity of 12,742 megawatts.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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