Tata Power to raise Rs 2,600 cr from promoter, set up InvIT for renewable biz

Tata Power will issue 49,05,66,037 equity shares on a preferential basis to Tata Sons Private Limited (“Tata Sons”) for an aggregate consideration of Rs 2,600 crore.

Tata Power on Thursday said its board has approved a proposal to raise Rs 2,600 crore through issuance of preference shares to its promoter Tata Sons. “The board of directors of the company approved issuance of equity shares through a preferential issue to the promoter, Tata Sons, at a price of Rs 53 per equity share for an aggregate sum of Rs 2,600 crore, subject to shareholder approvals,” a regulatory filing said.

The board also gave in-principle approval for setting up of InvIT (Infrastructure Investment Trust) for the company’s renewable business on terms and conditions to be discussed with potential investors. Tata Power will issue 49,05,66,037 equity shares on a preferential basis to Tata Sons Private Limited (“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 per cent premium to Wednesday’s closing price, it added. Tata Sons’ shareholding will increase from 35.27 per cent to 45.21 per cent on allotment of equity shares pursuant to the preferential issue. Consequently, Tata Group’s shareholding will increase from 37.22 per cent to 46.86 per cent.

Tata Power 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 improvement in long term shareholder value, it added.

The long-term strategic plan involves reducing debt thereby strengthening the balance sheet and improving overall return metrics through: divestment of non-core and certain overseas investments; 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 raising of equity to reduce unsustainable debt in Tata Power and/or its subsidiaries.

The promoters of the company are fully supportive of the plan and are willing to back the company, it added.
The support of Tata Sons signals their strong conviction in the future prospects of the company. This benefits all shareholders by reducing debt, allowing the business to continue to invest and execute its long-term growth strategy, it added.

The Annual General Meeting of the shareholders will be held on July 30, 2020, wherein the company will seek shareholders’ approval for the preferential issue.

Commenting on the fund raising 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 & capitalize the Company to invest in future growth.

“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.”