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India’s largest independent power producer Tata Power’s INR 1,993.38 crore rights issue was oversubscribed nearly two times. The company had offered around INR 33.22 crore equity shares at INR 60 a share on a rights basis between March 31 and April 15.

The company collected INR 3,916.41 crore on application and plans to use the proceeds for capital expenditure and debt repayment. In the offer document for the issue, the company said it would extend INR 639.51 crore to Coastal Gujarat Power (CGPL), which operates the 4,000 mw Mundra ultra mega power project (UMPP) in Gujarat, for part-repayment of borrowings. About INR 533 crore will be used to partly repay some other borrowings.

The company’s total long-term outstanding debt from banks and financial institutions stood at INR 9,091.77 crore at the end of December 2013. A Mumbai-based independent broker said the real issue with Tata Power was not debt, but power tariff. “Debt can be serviced, if the government gets the pricing right and sets right parameters to fix it. The tariff structure is not right in the country. Power producers are taking a hit due to higher cost of fuel and absence of a proper mechanism to recover that,” the broker said.

Tata Power has earmarked INR 300 crore for generation, transmission and distribution of electricity in the Mumbai licence area and INR 498.35 crore for general corporate purposes. The company has existing capacity of 8,560 mw, while 840 mw capacity projects are being set up. The firm is increasing its global footprints by acquiring coal mines and building hydro and thermal power plants. JM Financial Institutional Securities, BNP Paribas, HSBC Securities & Capital Markets (India), Kotak Mahindra Capital and SBI Capital Markets were the lead managers to the issue.

Source-On Request