In a filing, Tata Power said, “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 crores”. The company will also set up an Infrastructure Investment Trust (InvIT) for the company’s renewables business after the approval it got from the board.
The company has pegged the shares’ Issue price at ₹53 per share, representing a 15 per cent premium over Tata Power’s closing price on July 1 at ₹46. After this move, Tata Sons’ shareholding will increase by 9.94 per cent from 35.27 per cent to 45.21 per cent. Also, the Group’s shareholding will get enhanced to 46.86 per cent from 37.22 per cent, previously.
The company said, “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”.
Voting on the matter will be held on July 30 in the company’s annual general meeting. CEO and Managing Director of Tata Power, Praveer Sinha 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 a part of Tata Power’s plan to deleverage its balance sheet by restructuring the business. The company has also been involving itself in divestment plans of its some non-core assets. Setting up an InvIT can help the company to monetise its renewable energy business. Currently, Tata Power’s renewable capacity is 3,557 MW.