Utility company Tata Power has received approval from its Board of Directors to issue equity shares through a preferential issue to the promoter, Tata Sons. This transaction will be at a price of Rs 53 per equity share for an aggregate sum of Rs 2,600 crore. However, subject to shareholder approvals.
In addition, the Board has given in-principle approval for setting up of InvIT for the Company’s renewable business on terms and conditions to be discussed with potential investors.
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.
The company 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.
Tata Power is mulling over reducing debt. It hopes to achieve that by 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.
The Annual General Meeting of the shareholders will be held on July 31, 2020 wherein the company will seek shareholders’ approval for the preferential issue.
Commenting on the fundraising plan approved by the Board, Praveer Sinha, CEO and 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.”