Why Moody's has upgraded Tata Power ratings
Premium- Tata Power ratings include a one-notch uplift based on Moody's assessment that the company will likely receive support from its major shareholder, Tata Sons, if needed
Ratings agency Moody's has assigned Ba2 rating to Tata Power, with the outlook being stable as the company looks set to cash in on the growing renewable energy business.
The other factors that influenced the Tata Power rating include a predictable cash flow from its regulated business, exposure to thermal coal prices for its Mundra project and Indonesian coal mines, and moderately high financial leverage.
Tata Power's Ba2 ratings include a one-notch uplift based on Moody's assessment that the company will likely receive support from its major shareholder, Tata Sons, if needed.
On Thursday Tata Power shares were up marginally at 0.42%, trading at ₹238 in noon deals on NSE.
Tata Power had posted a 50% jump in consolidated net profit at ₹421 crore for September quarter 2021-22 on the back of higher revenues. It was ₹279 crore in the last year period.
"The rating also benefits from Tata Sons Ltd's 45.2% ownership in Tata Power and its track record of supporting the company," said Abhishek Tyagi, a Moody's Vice President and Senior Credit Officer.
The rationale given by Moody's for the stable outlook is based on the ratings agency's expectation that Tata Power's underlying business and financial profile will remain steady and that Tata Sons will support the entity if required.
Moody's said the Ba2 rating factors in moderate governance risk given the concentrated shareholding of Tata Sons.
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However, this risk is partially tempered by the experienced management team, which is further supported by experienced board members in the areas of corporate governance, business strategy, and operational and financial capabilities, among others, it said.
Tata Power's revenue from operations during the second quarter rose 18% to ₹9,810 crore as against ₹8,289 crore in the corresponding quarter of last year.
The company's CEO Praveer Sinha has recently said Tata Power's focus will continue to remain towards the expansion of its renewable and distribution businesses and go green strategy in the existing generation business.
Tata Power aims to scale up renewable business towards its 2030 target. Clean energy currently makes up 32% of Tata Power and portfolio which is expected to touch 80% by 2030, Sinha said.
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