Tata Power Company Ltd (TPCL) would monetise assets and continue to look at other ways to reduce its consolidated debt as the investment by the BlackRock Real Assets-led consortium will be pumped into Tata Power Renewables for investment in ongoing projects, TPCL’s top executive told Moneycontrol.
“Overall there will be no change in the debt because of this particular deal,” Sanjeev Churiwala, chief financial officer, TPCL told Moneycontrol.
On April 14, TPCL 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 will be in fresh equity in the newly formed green energy company, and therefore, the parent TPCL will not get any part of the proceeds.
“This particular funding is to ensure that we can keep on growing our renewable energy platforms, which is our biggest growth asset right now. We wanted to secure it. On a standalone and consolidated basis, we will continue to look at other possibilities in non-core assets or any other opportunities we have. That’s a continuous program that will keep on running,” Churiwala said.
TPCL has been working towards reducing its debt since the fiscal year 2016-2017 when its gross debt level crossed Rs 49,000 crore. In 2020, N Chandrasekaran, the Chairman of the board of Tata Sons and also TPCL had said that the company is working to cut its gross debt to less than Rs 25,000 crore by the end of the financial year from a consolidated gross debt of Rs 48,376 crore and net debt of Rs 43,559 crore at the time. While the company has not been able to meet its debt reduction target, the gross debt reduced moderately to Rs 47,363 crore and net debt to Rs 40,000 crore as of December 2021. Tata Power Renewable has net debt of Rs 16,000 crore.
TPCL had planned to monetise its renewable energy assets by transferring them into an infrastructure investment trust (InvIT) but the plans were later scrapped.
“Earlier we had an InvIT programme, but as you can see, we have better valuation right now through this equity infusion. We will keep on looking at further equity raising within this platform, or any other platform going forward,” Churiwala said.
Earlier in a conference call with media, TPCL management had said that the current deal will take care of the equity required for its ongoing and new projects for the next two years.
“The overall debt level, we will continue to monitor and manage. We will look at non-core monetisation and other monetisation programmes that will have to kick in as we move forward…from an overall debt-equity ratio perspective, we have to see that we stay at the current level of 1.5-1.6,” the CFO said.
THE DEAL
TPCL will transfer all its utility-scale renewable energy assets and other related businesses to Tata Power Renewable, where the BlackRock-led consortium will invest. The platform will consist of five distinct businesses delivering long-term, customer-oriented solutions and all new renewable energy projects will be under it.
Moneycontrol was first to report, quoting a senior TPC official, that the BlackRock-led consortium would get a seat on the board of Tata Power Renewables.
The consortium will invest Rs 4,000 crore by way of equity and compulsorily convertible instruments for which they will acquire a 10.53% stake in Tata Power Renewables based on the base equity valuation of Rs 34,000 crore. The final shareholding may range from 9.76% to 11.43% on final conversion.
TPCL’s Managing Director and Chief Executive Officer Praveer Sinha said that the deal is a part of the company’s growth strategy in the renewable energy sector and will help the company grow faster. “Based on our current projections, this deal will take care of the equity for the next two years. But there are huge changes happening in power and renewable space and if something attractive comes up, we will revisit it.”
The deal will be concluded in the current fiscal, the management said. Tata Power Renewables aims to achieve a portfolio of over 20 gigawatts (GW) of renewable assets and a market-leading position in the rooftop and electric vehicle charging space across the country.
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