Tata Power is reportedly looking to sell stake in its renewable energy portfolio to global investors.
The Chief executive of Tata Power- Praveer Sinha speaking to Reuters said that the company is examining the option of bringing in global investors through an infrastructure investment trust, commonly called an InvIT, he added the funds would help the company reduce debt.
This will be a private InvIT where some global players who are long term investors.
According to the news agency Tata Power currently has a debt of Rs 44,000 crore ($6.1 billion) and a debt to equity ratio – a financial metric which shows how much of a company’s operations are funded by debt – of 2.2.
“We want to bring down the covenant to two,” Sinha said of the ratio.
The agency notes that Tata Power will take final call on the InvIT plan in six months.
India’s power consumption fell sharply in October and has contracted for the last three straight months amid slowing economic growth.
This has not only pushed several power companies to operate plants below capacity, but also curtailed their ability to service debt.
Prime Minister Narendra Modi’s government has tried to fix the economy with various fiscal measures, but economists say they are not enough to boost consumption and industrial activity.
Analysts expect economic growth to come in way below 5% for the September quarter.
“You have to empower people. If they have money then you can make a society a consumption society,” Sinha said.
Though many of the government’s initiatives are to enhance supply, sooner or later it will come up with plans to bolster consumption as well, Sinha said.
Tata Power is selling its stakes in overseas renewable and mining projects to raise up to a billion dollars over the next 18 months. This will also help reduce dent, Sinha said.