Why A Renewables InvIT Is Critical For Tata Power’s Plan To Pare Debt

As shares of Tata Power Company Ltd. rose, tracking the equity rebound from pandemic-driven lows, investors also bet on the company’s plan to pare debt. But one key milestone for the planned deleveraging has missed the deadline.

The power generator planned to hive off its renewables portfolio into an infrastructure investment trust. The InvIT transaction would have slashed its Rs 42,454 crore gross debt by more than a fourth.

The binding agreement for the proposed InvIT was to get board approval by the end of February and the spinoff was expected by end of March, Praveer Sinha, managing director at Tata Power, had said in an interview with BloombergQuint.

The company missed that deadline.

The Economic Times reported earlier this month citing unnamed people that a proposed $2-billion investment by Malaysia’s Petroliam Nasional Bhd (Petronas) has been called off. And that the Indian company is now considering an initial public offering for its renewable unit.

In an emailed response to BloombergQuint, Tata Power said it is exploring various options, including InvIT, for its renewables business and “shall be able to comment once developments reach a stage of announcement”. The fundraise will depend upon the green business portfolio finally monetised and in any such initiative, the company would continue to engage with multiple parties, it said, adding that no final decision has yet been taken with respect to investors.

Shares of Tata Power tumbled more than 12% after the report. Yet, it’s still trading 245% higher from its November low of Rs 27.

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