Tata Power may sell some of its investments and raise equity to help slash a $4.9 billion debt pile, its executive director said, as expensive imported coal, below-cost power tariffs and a weak rupee weigh on its earnings.
“At the moment we are studying what are the various options available to us to improve the debt-to-equity situation so that the credit rating pressures are lesser,” S. Ramakrishnan told Reuters in a phone interview on Tuesday.
“Options include sale of investments, raising of equity — all those are there. They are all under study. No decision has been taken,” he added.
Tata Power’s financial investments include stakes in sister firms in the salt-to-software Tata conglomerate, including 17 per cent of Tata Communications, valued at roughly $180 million, and shares in Tata Teleservices (Maharashtra) Ltd and Tata Consultancy Services Ltd.
Tata Power joins local rivals Lanco Infratech and GVK Power and Infrastructure in exploring options to raise cash to pare debt, as a weak economy and regulatory bottlenecks drag on the performance of power companies.
Tata is bleeding cash from its Mundra plant in western India as it has been unable to pass along the high cost of imported coal to customers despite a decision by a federal regulator in April paving the way for a tariff increase.