Tata Power Company (TPC), the largest private sector power player in the country, plans to divest part of its stake in group companies Tata Teleservices (TTSL) and Tata Teleservices (Maharashtra) (TTML) to raise about Rs 2,000 crore for funding its ongoing projects, said informed sources.
The company is looking to sell stake after the promoter, Tata Sons, dropped its preferential warrants conversion plan, which would have fetched Rs 1,900 crore to the company. For funding the projects under implementation, Tata Power needs about Rs 24,000 crore in the next four years. The game plan is to raise Rs 18,000 crore through debt and the balance Rs 6,000 crore as equity.
According to the data compiled by Capitaline, the unlisted firm TTSL has over 6,100 million equity shares at a face value of Rs 10 each as on March 2007. TPC's 711.4 million shares, as on March 2008, in TTSL would constitute 11.66 per cent of its equity base. In accordance with the valuation done for the DoCoMo deal, the stake could fetch $1.2 billion (around Rs 6,000 crore) for TPC. Japanese telecom operator NTT DoCoMo had picked up 26 per cent stake in TTSL for $2.7 billion (around Rs 13,500 crore).
TPC has about 13.73 crore shares in TTML that constitute 7.24 per cent of the total equity. At the current share price of Rs 22.40, TPC could raise over Rs 300 crore from the stake sale.
An e-mail response from Tata Power said that the company did not want to comment on rumours and market speculations. “Tata Sons has not exercised its option to convert the 1,03,89,00 warrants issued to it into equity shares. Tata Power has alternative arrangements to raise funds for its capex required,” added the spokesperson. "The stake sale will be finalised only after consulting the promoter firm. If Tata Sons agrees to buy it, the fund raising will be smoother. Otherwise, TPC will have to find a suitable buyer after negotiations," said the source. In the company’s presentation to investors in July 2008, TPC mentioned that it would raise fund through disinvestment of various holdings or assets and equity dilution through warrants, preferential issue and/ or rights if required. The company is looking to raise overseas loans through external credit agencies and multilateral agencies such as ADB, IFC.
According to the last annual report, the company had divested some of its investments, including telecom investments, realising Rs 380 crore towards meeting a part of its funding requirements for expansion projects. Tata Power is executing five major thermal power projects to add 5,660 MW capacity within a few years, which include 4,000-MW Mundra Ultra Mega Power Project (UMPP).
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Tata Power has achieved financial closure for this project. The other projects include 1,050-MW (Rs 4,450 crore) Maithon, which is a 74: 26 joint venture of Tata Power and Damodar Valley Corporation, 120-MW each captive power projects at Jojobera (Rs 620 crore) and a 74:26 JV (Rs 490 crore) with Tata Steel at Jamshedpur, a 250-MW unit at Trombay (Rs 1,066 crore) and a 120-MW project at Haldia (Rs 605 crore).
Apart from this, Tata Power has five major thermal power projects with 5,670 MW of capacity addition in the pipeline.
This include 2,400-MW Dehrand project, 2,270-MW at Naraj Marthapur, a 500-MW tubed power plant and a 500-MW captive plant for Tata Steel. Tata Power is also actively exploring opportunities for producing an additional 1,000 MW in large hydel projects and is planning to add 300 MW in wind energy.