Moody’s Upgrades Tata Power’s Corporate Family Rating

Moody's Upgrades Tata Power's Corporate Family Rating
Moody's Upgrades Tata Power's Corporate Family Rating
Moody's Upgrades Tata Power's Corporate Family Rating
Moody's Upgrades Tata Power's Corporate Family Rating

Moody’s Upgrades Tata Power’s Corporate Family Rating

Moody’s Upgrades Tata Power’s Corporate Family Rating

Moody’s Investors Service has upgraded Tata Power’s Corporate Family Rating (CFR) from Ba2 to Ba1 and maintained a stable outlook, citing the company’s robust financial performance.

The upgrade reflects Tata Power‘s strong financial metrics, which are expected to remain above the threshold for the previous Ba2 rating.In a regulatory filing to stock exchanges, Tata Power confirmed the upgrade, highlighting that Moody’s had raised its corporate family rating to Ba1 and maintained a stable outlook.

Factors Behind the Upgrade

Moody’s cited several factors contributing to the upgrade, including Tata Power’s solid financials, predictable cash flows from its distribution businesses benefiting from a stable regulatory framework, and fixed-tariff long-term power purchase agreements for its renewable generation capacity.

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Moody’s projected that Tata Power’s operating cash flow pre-working capital to debt (CFO preWC/debt) would remain strong at 9-11 percent over the next two to three years, supporting the rating upgrade.The takeover of distribution companies in Odisha and improvements in operations, marked by reduced electricity losses, have bolstered Tata Power’s business profile, according to Moody’s. The agency expects Tata Power’s regulated distribution businesses to continue generating core earnings and supporting its financial metrics for at least the next 1-2 years.

Parental Support Uplift

Tata Power’s Ba1 rating also benefits from a one-notch uplift for parental support. Moody’s anticipates that Tata Power will receive support from its major shareholder, Tata Sons Ltd, if necessary, citing Tata Sons’ ability to provide timely support to its investee companies.

Tata Sons increased its shareholding in Tata Power from 35 percent to 45 percent through a preferential allotment of Tata Power’s shares in 2020. Moody’s also noted Tata Power’s role in supporting the decarbonization efforts of Tata group companies.Tata Power’s shares closed 1.57 percent higher at ₹262.20 apiece on the BSE following the announcement.This rating upgrade reflects Tata Power’s strong financial position and its potential to maintain healthy financial metrics in the coming years.

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