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Tata Power announced that a consortium led by US-based BlackRock Group, including Mubadala, will invest. ₹4,000 crore in its subsidiary, Tata Power Renewable Energy Ltd, for a stake of more than 10%. Tata Power shares fell more than 4% ₹262 points against the BSE in Monday’s early offer.
Tata Power said in a statement that the first round of investment is expected to be completed in June 2022 and The balance of the funds will be received at the end of the outstanding calendar year.
“Tata Power has announced the integration of all green businesses (RE) under TPREL, and a binding agreement with a group of companies led by BlackRock. The sale of shares can be 9.76-11.43% depending on the results of FY23, and means the value of the shares before money of. ₹310-370 bn (midpoint INR 340 bn) for TPREL,” broker Edelweiss said in a note.
In the run-up to the deal, the stock rose 20% in seven trading sessions. Therefore, although the deal has a positive structure, brokers expect the stock to fall in the short term as the impact on the well-run Mundra settlement and the uplift in earnings due to current coal prices are short-term impacts.
“The value of the deal is slightly below our expectations. However, it is a very positive development for Tata Power as it funds RE capex for the next three years, and the new structure will increase the efficiency of capitalization and fundraising in the future. It will follow the rapid growth of RE,” the note said.
In its view, the fundraising is likely to provide enough growth capital for the next 4-5GW of RE capacity and 4GW of new generation.
“This will have a significant impact on revenue growth due to the integrated business model and may increase the operating profit of TPREL by 2.5-3 times in the next three-four years. In addition, the new structure of TPREL will help to increase the efficiency of cash flow, and leverage management and capital raising,” Edelweiss notes added.
The views and recommendations stated above are those of individual analysts or brokerage firms, and not those of Mint.
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