The Tata has reached out to some top fund houses and investment bankers, trying to assess the investors’ appetite. The funding is reported to be in the range of Rs 3,000-4,000 crore.
The proposed bonds may offer about 9-9.25%, or a little less, for those securities. The company is now considering different maturity options that suit investors best. For example, it could either be a 10-year maturity with one-year put and call option, which allow both investors and issuers to surrender or withdraw the issue after the stipulated period but well before the scheduled maturity.
Bonds may also be of multiple maturities ranging between one and four years, said one of the persons close to developments to the ET.
Tata Power, on its part, responded to the media queries with, “Tata Power does not respond to market speculations. As a company, we are always open to evaluating various options that could create shareholder value.”
Tata Power Renewable Energy, a special purpose vehicle created with a focus on non-conventional energy, is likely to be the issuer of bonds with a corporate guarantee from the parent Tata Power Company.
“The proposed bond sale may be of the nature of ‘structured obligation’, where a large parent entity guarantees repayment to investors who subscribe group entity securities,” said another person close to the developments.
Domestic rating companies such as CRISIL has rated Tata Power Company as AA- with a stable outlook. During the January-March quarter, Tata Power’s consolidated net profit more than doubled to Rs 360.25 crore on strong operational performance and lower fuel cost.
For the full fiscal year FY16, the company reported a consolidated net profit of Rs 873.35 crore against Rs 167.83 crore a year ago. Over the next 12-18 months, global rating company Moody’s expects Tata Power’s financial position to remain stable.
(The writer is CEO, Track2Realty)