Moody’s has upgraded Tata Power’s corporate family rating from Ba2 to Ba1 with a stable outlook. The upgrade is driven by Tata Power’s strong financial performance, which is expected to exceed the criteria for the earlier Ba2 rating. This rating incorporates the company’s standalone credit quality and receives a one-notch uplift for shareholder support.
Tata Power’s standalone credit quality is supported by reliable cash flow from its distribution businesses, benefiting from a stable regulatory environment, and its fixed-tariff long-term power purchase agreements for renewable generation capacity.
Moody’s projects Tata Power’s operating cash flow to debt ratio to remain solid at 9-11% over the next few years, supporting the upgrade despite lower credit metrics in fiscal 2023.
The takeover of distribution companies in Odisha and improved operations with reduced electricity losses have strengthened Tata Power’s business profile. Its regulated distribution businesses are expected to continue generating earnings for the next 1-2 years.
Tata Power’s Ba1 rating also reflects a one-notch uplift for potential support from major shareholder Tata Sons Ltd., which has increased its stake in Tata Power to 45% from 35% in 2020. Tata Power plays a crucial role in the Tata group’s decarbonization efforts.
In trading on Friday, Tata Power’s shares surged on the NSE, closing at Rs. 262.40, marking a gain of 1.69%.