Leaders in Power Utility company, Tata Power on Thursday said, “Its board has approved a proposal to raise Rs 2,600 crore through issuance of preference shares to its promoters.”
In a regulatory filing, the company said, “The board o directors of the company approved the issuance of equity shares through a preferential issue to the promoter, Tata Sons, for Rs 53 per equity share for an aggregate sum of Rs 2,600 crore subject to shareholder approvals.”
“The board also gave in-principle approval for setting up InvIT (Infrastructure Investment Trust) for the company’s renewable business on terms and conditions to be discussed with potential investors,” the filing added.
“The company will issue 49,05,66,037 equity shares on a preferential basis to Tata Sons Private Limited (Tata Sons) for an aggregate consideration of Rs 2,600 crore,” the filing said.
“The issue price is fixed at Rs 53 per equity shares representing a 15 percent premium to Wednesday’s closing,” it added.
Adding to the filing, Tata Power said, “The allotment of the equity shares pursuant to the preferential issue will increase the shareholding of Tata Power to 45.21 percent from 35.27 percent.”
“Tata Power 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,” the company said.
“The long-term strategic plan involves reducing debt, thereby 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. Consequent to this, the Company has decided to pursue setting up of InvIT for its renewables business. Raising equity to reduce unsustainable debt in Tata Power and/or its subsidiaries,” Tata Power said.
“The Promoters of the Company are fully supportive of the plan and are willing to back the Company. The support of Tata Sons signals their strong conviction in the 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.
Speaking on the fundraise, Praveer Sinha, CEO & Managing Director of 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 & capitalize the Company to invest in future growth.”
“Similarly, the Board’s in-principle approval for setting up 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,” Praveen added.
Further adding to the statement, the company said, “The Annual General Meeting (AGM) of the shareholders will be held on 30 July 2020. Wherein the company will seek shareholders’ approval for the preferential issue.”