The board of directors of Tata Power has approved issuance of 490,566,037 equity shares on a preferential basis to Tata Sons Pvt. Ltd (Tata Sons) for an aggregate consideration of Rs 26 billion. 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.
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.
According to a company release issued Thursday, Tata Power was working on a strategic turnaround plan to strengthen the fundamentals of the company through a mix of divestment and business restructuring to deleverage the balance sheet and improve the capital structure of the company. These actions were expected to improve the fundamentals and lead to improvement in long-term shareholder value.
In June, the company had announced that its Singapore-based fully-owned subsdiary, Trust Energy Resources Pte Ltd (TERPL) had entered into definitive agreements with Oldendorff Carriers GmbH & Co. KG, Germany for the sale of three ships at an estimated consideration of $212.76 million.
The long-term strategic plan involved reducing debt thereby strengthening the balance sheet and improving overall return metrics through divestment of non-core and certain overseas investments and restructuring of some of its businesses to unlock value and simplify the structure of the company and its subsidiaries. Consequent to this, the company had decided to pursue setting up of InvIT for its renewables business and raising of equity to reduce unsustainable debt in Tata Power and its subsidiaries.
The promoters of the company were fully supportive of the plan, the release claimed.
“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 said.
The annual general meeting of the shareholders will be held on July 30 wherein the Company will seek shareholders’ approval for the preferential issue.
Commenting on the fund raising plan approved by the board, Praveer Sinha, CEO & Managing Director, 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.”