Tata Power: Conquering Crisis
When you have a history that goes back more than 100 years, managing unexpected disruptions is something you know first hand. Back in 1915, when Tata Power commenced operations with a hydro electric project in Maharashtra, the founders had a clear vision of supplying uninterrupted power to millions of consumers. Today, Tata Power is the largest integrated power company in India with its total customer base crossing the 2.6 million mark.
As the company emerges at the top as BW’s Most Respected Company’, (Infrastructure), the man at the helm, Anil Sardana, CEO, Tata Power, presses on the constant endeavour of the company to work towards the vision of its founder— clean, cheap and abundant power, as the basic ingredients for the economic progress of the country.
However, recent events have led to turmoil and uncertainty. The company has been facing the brunt of what was once the ‘crown jewel’ of Tatas’ — Tata Mundra Ultra Mega Power Project.
Since the decision of the Supreme Court for disallowing compensatory tariffs to cater to higher fuel costs, the company is now laying heavy focus on reducing its debts significantly. The reputation and profits of the company today stand at a cross roads. But unlike other power players complaining in a shrill voice, Tata Power has been busy laying more emphasis on working out on alternative plans, to retain normalcy.
The management has assured that some of the non-core investments would be sold in FY18, with methods being laid to reduce the under recovery. The company has put in an assurance with its ownership in the Indonesian coal mine, which works as a natural hedge.
“We have nothing to write off and we don’t need to undertake any impairments. We have given the bankers’ guarantee from Tata Power so they will not have any sleepless nights on account of our projects as they are protected,” Sardana said in a newspaper interview recently.
As a matter of fact, Tata Power is a high debt company, which should put the public investors in a fix. However, what holds significance is how Tata Power has been applauded by the industry for clamping this debt with quality management and strategic restructuring.
According to reports, Tata Power’s assets stood at Rs 70,487 crore, as of March. With the company’s effort to deleverage its balance sheet and put the debt at place, analysts expect the net debt-equity ratio to drop to 2.6 in 2017/18 and 2.2 in 2018-19.
Among the growing disruption in the power sector, with government and the world shifting their portfolios towards more cleaner energy, it did not take much heed for the company to cash on to this opportunity. Tata Power became the biggest renewable company crossing a portfolio of 2,000 MW this year.
Though renewable holds a minor share in the total power business of the company, it has become the key growth and revenue driver of its total portfolio. Tata Power consolidated its position even further with the acquisition of Welspun assets last year, one of the biggest deals till date in the country.
“We aim to build 20,000 MW by 2025 and have sketched out well defined plans to shape up our balance sheets,” says Sardana, who mentions how the company aims to increase the share of non-fossil fuel based generation output to 30- 40 per cent by 2025.
With N. Chandrasekaran coming on board as the new group Chairman, the company is expected to make positive headways and hopefully continue to retain the ‘Most Respected Company’ title.
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