Why Moody’s has upgraded Tata Power Rating

Other factors affecting Tata Power’s rating include projected cash flows from its regulated business, thermal coal price risks for its Mundra project and Indonesian coal mines, and moderately high financial leverage.

Tata Power’s BA2 rating includes a move up a notch based on Moody’s assessment that the company is likely to get support from its major shareholder Tata Sons, if needed.

On Thursday, the shares of Tata Power were trading at a level of 0.42% with a slight increase. Deals on 238 NSE in the afternoon.

Tata Power posted a 50% jump in consolidated net profit on 421 crore for the September quarter 2021-22 on the back of higher revenue. He was 279 crore in the previous year period.

“The rating also benefits from Tata Sons Limited’s 45.2% ownership in Tata Power and its track record of supporting the company,” said Abhishek Tyagi, Moody’s Vice President and Senior Credit Officer.

The rationale for a stable outlook by Moody’s is based on the rating agency’s expectation that the underlying business and financial profile of Tata Power will remain stable and that Tata Sons will support the entity, if necessary.

Moody’s said the BA2 rating factor poses moderate governance risk, given Tata Sons’ concentrated shareholding.

However, this risk is partially handled by an experienced management team, supported by experienced board members in the areas of corporate governance, business strategy and operational and financial capabilities.

Tata Power’s revenue from operations up 18% during Q2 9,810 crore as against 8,289 crore in the corresponding quarter of last year.

The company’s CEO Praveer Sinha recently said that Tata Power’s focus will be on expanding its renewable and distribution businesses and green strategy in the current generation business.

Tata Power aims to grow the renewable business towards its 2030 target. Sinha said clean energy currently accounts for 32 per cent of Tata Power’s portfolio, which is expected to reach 80 per cent by 2030.