Tata Power Company Ltd aims to pare its consolidated gross debt of Rs 49,693 crore by divestments and cash flows but the company is not chasing its earlier target of reducing it to Rs 25,000 crore anymore given the growth trajectory, Chief Executive Officer and Managing Director Praveer Sinha told Moneycontrol in an interview.
The company’s gross debt increased from Rs 47,590 crore in the previous quarter of the current fiscal and Rs 48,502 crore in the June quarter a year ago due to an increase in borrowings for capex and working capital. In July 2020, at the company’s Annual General Meeting, Tata Sons Chairman N Chandrasekaran said that the group’s utility will bring down its gross debt to around Rs 25,000 crore, a target that the company was pursuing since then.
“We’ve not set a target for ourselves, because we are also now parallelly growing. When we were talking about bringing it down to Rs 25,000 crore, we didn't have a growth plan. Now we are growing so debt has to be such that we should be able to cater to that,” Sinha said.
He said that the company is comfortable with the current financial ratios, and the earnings before interest, tax, depreciation and amortization (EBITDA) from the business would help service the debt.
Tata Power’s net debt-to-equity ratio reduced marginally to 1.55 in the first quarter of FY23, from 1.57 in Q1FY22. The company’s net debt to underlying EBITDA (on a rolling 12-month basis) also witnessed a fall to 4.11 in Q1FY23 from 4.15 a year ago.
In April, Tata Power announced that it has entered into a binding agreement with a consortium led by BlackRock Real Assets (BlackRock), which included Mubadala Investment Company (Mubadala), for an investment of Rs 4,000 crore in its renewable energy subsidiary, Tata Power Renewable Energy Limited (TPREL). The investment, which received approval from the Competition Commission of India (CCI) earlier this week, is in fresh equity in the newly formed green energy company, and therefore, the parent company will not receive any proceeds.
“We still have some assets where divestment will happen, like our assets in Georgia or Zambia. We will also receive some money this year from our earlier stake sale in the Arutmin mine,” Sinha said.
Tata Power sold its 30 percent stake in Indonesian coal company PT Arutmin; it will receive a residual payment of around $120 million. As a part of its strategy to divest non-core assets, Tata Power aims to sell its projects in Zambia and Georgia, but only when the company receives a “good value”, the CEO said.
“Our performance is improving, and we have a better cash flow. We'll be able to address it (debt) from the profit of the company,” Sinha said.
Tata Power’s total power portfolio stands at 5,524 megawatts (MW), which includes an installed capacity of 3,634 MW and 1,890 MW under various stages of implementation. The company plans to spend Rs 14,000 crore on its consolidated capital expenditure (capex) 2022-23, of which Rs 10,000 crore would be on renewable projects. The company has earlier said that it will spend Rs 75,000 crore to expand capacity in its renewable business.
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