The Tata Power Board has approved raising ₹2,600 crore through the issue of preferential shares. The board has also given its in-principle approval for setting up of an Infrastructure Investment Trust (InvIT) for the company’s renewables business
“The Board of Directors of Tata Power has approved the issuance of 49,05,66,037 equity shares on a preferential basis to Tata Sons for ₹2,600 crore,” Tata Power said in a filing.
The issue price for the shares has been fixed at ₹53 per share, which represents a 15 per cent premium over Tata Power’s closing price of ₹46 on Wednesday.
With this, Tata Sons’ shareholding will increase from 35.27 per cent to 45.21 per cent . Consequently, Tata Group’s shareholding will increase from 37.22 per cent to 46.86 per cent.
“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,” the company said.
This will be put to vote in its AGM, to be held on July 30. 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 and capitalise the company to invest in future growth. Similarly, 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.”
This is part of Tata Power’s efforts to turn around the company through business restructuring to reduce high debt on its books. While Tata Power has been divesting some of its non-core assets, it is hoping that by setting up an InvIT it can monetise its renewable energy business.
Tata Power’s renewable capacity at present is 3,557 MW, out of which 2,637 MW is operational and 920 MW is under implementation.