Crisil Ratings Revises Tata Power’s Outlook To ‘Positive’ From ‘Stable’
The Crisil note said there will be an improvement in Tata Power’s credit risk profile due to improvements at its Gujarat plant, Coastal Gujarat Power Ltd. (Photographer: Dhiraj Singh/Bloomberg)

Crisil Ratings Revises Tata Power’s Outlook To ‘Positive’ From ‘Stable’

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Tata Power Co. Ltd. on Friday said domestic credit ratings agency Crisil Ltd. 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, Tata Power said.

The Crisil note on Tata Power’s outlook gave two more reasons for raising the outlook.

The note said there will be an improvement in Tata Power's credit risk profile due to implementation of the high power committee's recommendations for its subsidiary Coastal Gujarat Power Ltd. and also continued deleveraging through sale of non-core assets such as the strategic engineering division.

The agency said the high power committee recommended sharing the losses incurred in CGPL between consumers, lenders, and developers in Oct. 2018.

After this, the Supreme Court ruled that power purchase agreements could be amended with distribution companies subject to Central Electricity Regulatory Commission's 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," Crisil said in the note.

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.

On Friday, Tata Power shares rose 1.30 percent to Rs 66.10 apiece on the BSE while the benchmark Sensex gained 0.22 percent to end the day at 39,615.90 points.

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