Deleveraging to power sustainable growth
To achieve this, we had initiated a number of actions such as:
We have made significant progress on all the above initiatives and have been able to reduce debt. With these initiatives, our D/E ratio, which was more than 2.19 in FY19, has come down to 1.53 in FY22, a very significant improvement.
Further, we have also taken a number of initiatives to improve our working capital cycle, both on the debtors and creditors side. We have been able to facilitate financing arrangements for our suppliers and vendors, so that they are able to provide longer credit periods at very attractive terms. We have also been able to factor as well as arrange bill discounting facilities against our receivables from the Discoms, enabling us to improve our overall collections.
Leveraging the current interest rate scenario, we also pro-actively converted a portion of our short-term loans into long-term, thereby improving our liquidity position and mitigating any refinancing risks.
Our actions on debt management and key outcomes on our financial rations have been positively assessed by both domestic and international credit rating agencies, thus resulting in a rating upgrade during the year.
Business transformation to foster future growth
To future-proof our business, we are undertaking significant strides across multiple levels, and have established specific near-term goals to optimise our growth and market position.
Customer @ Centre
Managing financial capital and growth prospects
We are on a growth trajectory that requires continual investments for projects and ventures, in addition to maintaining optimal operational performance. Our financial capital is powered by a mix of debt and equity sources, apart from our rising cash flows and accruals. As part of our strategy, we are according an undeterred focus on deleveraging, tapping growth and returns from new growth areas, and an increased funding commitment from the promoters.
Strengthening balance sheet
In the recent past, we have offloaded considerable debt from our books through various initiatives including divestment in foreign assets, deploying strategies for input price management and undertaking mergers for better tax efficiency. We are also attracting equity stake in our future-ready Renewables business from world-class investors, potentially unlocking substantial value.
Our Board of Directors has approved the raising of ₹ 4,000 crore by Tata Power Renewable Energy Limited (TPREL), wholly owned subsidiary of Tata Power, which will set up India's most comprehensive renewable energy platform. The funds of ₹ 4,000 crore would be invested by a consortium, led by BlackRock Real Assets, along with Mubadala as co-investors, at the equity base valuation of ₹ 34,000 crore*.
Under the proposed structure, TPREL will become the holding company of all our renewable businesses, including utility scale generation, manufacturing of cells and modules, EPC for renewable business, O&M services, rooftop solar, solar pumps and EV charging business. All future renewable businesses will be developed under this holding company.
*Subject to the adjustments based on FY23 EBITDA
Debt movement in FY22
In FY22, we have been able to maintain a sustainable debt profile, led by robust cash flows from operations and as an outcome of our strategy.
Net Debt/underlying EBITDA target
Net Debt/Equity target
At Tata Power, we are well placed to drive long-term shareholder returns by tapping into the large market potential and emerging opportunities. We are exponentially scaling up our Renewables business growth by aligning to the burgeoning RE environment, and pursuing strong opportunities in the transmission sector. We are transitioning to become a brand-led, and customer-focused player. We have laid out plans to expand our distribution footprint across India, leverage technology to expand rooftop solar and solar pumps, and create innovative, low carbon solutions for customers through ESCO, home automation and EV charging. This rightly positions us to become one of the top two energy companies in India.
Planned growth for green portfolio and B2C business
Reallocation of capital employed
We are shifting capital employed from Mundra and thermal business to cleaner and consumer-driven businesses.
Performance in FY22
All our business clusters contributed strongly to our profitable growth despite continued impact of COVID-19 and buoyant input prices.
Note: The Management Discussion and Analysis section on page 135 provides more details on the financial performance of the Company.
Note: FCFBC=Free cash flow before capex
FCFAC= Free cash flow after capex
Free cash flow = Cash from operating activity + dividend income – dividend paid – distribution on unsecured perpetual securities – capex
Economic value added
|Economic value distributed||29,110||33,322||43,336|
|Employee wages and benefits||1,441||2,317||3,612|
|Payments to providers of financial capital3||4,674||4,429||4,214|
|Payments to government by country4||609||447||695|
|Community investments - CSR||34||39||35*|
|Economic value retained = Direct economic value generated less economic value distributed||400||357||160|
*CSR in FY22 includes both spend and unspend amount