Tata Power on Friday said domestic credit rating agency Crisil has revised its outlook on the company to “positive” from “stable”.
Clearing off of all dues on debentures worth Rs 1,082 crore and a term loan of Rs 605 crore helped in the revision of the outlook, the company said.
In the rating agency’s note shared by the company, it gave out two more reasons for upping the outlook.
It said there will be an improvement in Tata Power’s credit risk profile on implementation of the high power committee (HPC) recommendations for its subsidiary Coastal Gujarat (CGPL) and also continued deleveraging through sale of non-core assets such as the strategic engineering division (SED).
The agency said the HPC recommended sharing the losses incurred in CGPL between consumers, lenders, and developers in October 2018.
After this, the Supreme Court ruled that power purchase agreements (PPAs) could be amended with distribution companies subject to Central Electricity Regulatory Commission’s (CERC) approval, it said.
“A change in CGPL’s PPA, in line with HPC recommendations, could reduce its under recovery to around 15 -20 paise per kWh from the current 60-65 paise per kWh,” the agency said.
Tata Power’s consolidated leverage profile has improved over the past one year, with adjusted debt/EBITDA of around 4.9 times in fiscal 2019 from 5.3 times in fiscal 2018 supported by increased profitability, it said.
While a Tata Power statement said the review in outlook is “indicative of a potential upgrade to a better rating in the forthcoming future”, the agency said the rating could be upgraded if the HPC recommendation is implemented and there is continued deleveraging.
The Tata Power scrip closed 1.30 per cent up at Rs 66.10 a piece on the BSE Friday, as against gains of 0.22 per cent on the benchmark.