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    Tata Power Company: Capital Structure

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    harsh kot
    Tata Power is India's largest integrated power company with over 10,000 MW of generation capacity, including 36% from clean energy. It has over 100 years of operations both within and outside of India, including solar energy production capacity of 1,694 MW. Tata Power finances its operations through a mix of equity and debt, with total equity of Rs. 270.5 crore and long-term debt between Rs. 8,123.84 crore and Rs. 8,749.72 crore between Fiscal Years 2016-17 to 2018-19. The company's cost of debt is between 6.65-7.78% after tax and its weighted average cost of capital is estimated to be between 11

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    Tata Power Company: Capital Structure

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    harsh kot
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    Tata Power is India's largest integrated power company with over 10,000 MW of generation capacity, including 36% from clean energy. It has over 100 years of operations both within and outside of India, including solar energy production capacity of 1,694 MW. Tata Power finances its operations through a mix of equity and debt, with total equity of Rs. 270.5 crore and long-term debt between Rs. 8,123.84 crore and Rs. 8,749.72 crore between Fiscal Years 2016-17 to 2018-19. The company's cost of debt is between 6.65-7.78% after tax and its weighted average cost of capital is estimated to be between 11

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    Tata Power is India's largest integrated power company with over 10,000 MW of generation capacity, including 36% from clean energy. It has over 100 years of operations both within and outside of India, including solar energy production capacity of 1,694 MW. Tata Power finances its operations through a mix of equity and debt, with total equity of Rs. 270.5 crore and long-term debt between Rs. 8,123.84 crore and Rs. 8,749.72 crore between Fiscal Years 2016-17 to 2018-19. The company's cost of debt is between 6.65-7.78% after tax and its weighted average cost of capital is estimated to be between 11

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    184 views5 pages

    Tata Power Company: Capital Structure

    Uploaded by

    harsh kot
    Tata Power is India's largest integrated power company with over 10,000 MW of generation capacity, including 36% from clean energy. It has over 100 years of operations both within and outside of India, including solar energy production capacity of 1,694 MW. Tata Power finances its operations through a mix of equity and debt, with total equity of Rs. 270.5 crore and long-term debt between Rs. 8,123.84 crore and Rs. 8,749.72 crore between Fiscal Years 2016-17 to 2018-19. The company's cost of debt is between 6.65-7.78% after tax and its weighted average cost of capital is estimated to be between 11

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 5

    Tata Power Company

    Tata Power is India’s largest integrated power company with 10763 MW capacity where 36%
    includes clean energy. Tata Power is also present outside India and has 100+ years of history.
    Tata Power also has a capacity of 1694 solar energy production.

    Capital Structure

    Tata Power Company has a mix of equity and debt. In 2016-17, equity share capital amounted to
    Rs. 270.5 crore, 11.4% unsecured perpetual security Rs. 1500 crore and other equity to Rs.
    14,778.06 crore and debt of Rs. 8847. 86 crore. In 2017-18, the equity share capital amounted to
    Rs. 270.5 crore, 11.4% unsecured perpetual security amounting to Rs. 1500 crore and other
    equity (reserve and surplus) of Rs. 12,718.03 crore, and debt amounting to 8123.84 crore. In FY
    2018-19, the equity share capital remained same i.e. 270.5 crore, 11.4% unsecured perpetual
    security amounting to 1500 crore, other equity amounting to Rs. 13,919 crore. The debt
    increased to Rs. 8749.72 crores. The number of equity shares remained same at 270,64,25,810
    with face value of Rs.1. The authorized capital is Rs. 350 crore while the issued share is Rs.
    270.5 crore. The loans include long term borrowing of Rs. 8123.84 in FY 2017-18 increased to
    Rs. 8749.72 crore, deferred tax liability of Rs. 235.99 in FY 2017-18 increased to Rs. 583.49
    crore. The company has EPS (Earning per share) of 2.81. Debt to Equity ratio was 0.96 in FY
    2017-18 which increased to 1.09 in FY 2018-19.

    Year Equity Share Unsecured Other Equity Debt (Long term


    Capital (Rs. In Perpetual (Rs. In crore) borrowings) (Rs.
    crore) Security (Rs. In In crore)
    crore)
    2016-17 Rs. 270.5 Rs. 1500 Rs. 14778.06 Rs. 8847.86
    2017-18 Rs. 270.5 Rs. 1500 Rs. 12,718.03 Rs. 8123.84
    2018-19 Rs. 270.5 Rs. 1500 Rs. 13,919 Rs. 8749.72
    Source of Financing

    Tata Power has a mix of equity and debt. Equity shares were issued at face value of Rs.1 and
    total equity share amounted to Rs. 270.5 crore. The debt includes unsecured redeemable non-
    convertible debentures, term loans from banks such as ICICI bank, Axis bank, secured
    redeemable non-convertible debentures, secured term loans from HDFC bank, ICICI Bank,
    Kotak Mahindra bank, State bank of India, IDFC bank, Axis bank, Asian Development bank.

    Particulars 2016-17 2017-18 2018-19

    1. Unsecured Redeemable Convertible debenture


    a. 10.75% series 2072 1488.80 1490.45 1492.31
    b. 9.41% series 2073 498.85
    c. 9.48% series 2019 499.7 499.81 Nil
    d. 9.3% series 2023 499 Nil
    e. 7.99% series 2024 1495.55 1496.35

    Term Loan from banks


    a. ICICI Bank 605 Nil 523.55
    b. Axis Bank 333.06
    2. Secured – At amortized cost Redeemable Non-
    convertible Debenture
    a. 9.15% series 2025 137.82 121.84 105.86
    b. 9.15% series 2025 174.80 149.86 124.9
    c. 9.4% series 2022 209.54 209.58 209.63
    d. 10.1% series 2018 500 Nil Nil
    e. 10.4% series 2018 500 Nil Nil
    Term Loan from banks
    a. HDFC Bank 1157.81 1062.81 917.81
    b. ICICI Bank 123 Nil 624.76
    c. Kotak Mahindra Bank 477.5 438.75 712.73
    d. State Bank of India 993.75 1329.10 123417
    e. IDFC Bank 1127.90 782.28 623.44
    f. Axis Bank 333.38
    Term Loan from Others
    a. Asian Development Bank 31.68 19.01 6.33
    b. Indian Renewable Energy Development 266.38 8.8 2.94
    Agency Limited
    c. Technology Development Board, Department 27
    of Science & Technology, Government of
    India

    Cost of Borrowings:

    Table: Interest on Borrowings

    Particulars 2016-17 2017-18 2018-19


    1.     Unsecured Redeemable Convertible
    debenture      
    a.      10.75% series 2072 160.046 160.2234 160.4233
    b.     9.41% series 2073 46.94179    
    c.      9.48% series 2019 47.37156 47.38199  
    d.     9.3% series 2023   46.407  
    e.      7.99% series 2024   119.4944 119.5584
    2.     Secured – At amortized cost
    Redeemable Non-convertible Debenture      
    a.      9.15% series 2025 12.61053 11.14836 9.68619
    b.     9.15% series 2025 15.9942 13.71219 11.42835
    c.      9.4% series 2022 19.69676 19.70052 19.70522
    d.     10.1% series 2018 50.5    
    e.      10.4% series 2018 52    
    Total Interest on debentures 405.1608 418.0679 320.8015
    Interest on term loan (from statement of
    profit and loss) 521.2 553.75 573.83
    Total interest 926.3608 971.8179 894.6315
    Total Borrowing 8847.86 8123.84 8749.72
    Cost of Borrowing 10.47% 11.96% 10.22%
    Tax = 35%      
    Cost of Borrowing after tax 6.81% 7.78% 6.65%
    Cost of Equity using CAPM:

    CAPM Model:

    Ke= Rf+β (Rm-Rf)

    Rf= 6.46% (https://in.investing.com/rates-bonds/india-10-year-bond-yield-historical-data?v2=1)

    Rm= 15% (average)

    Manual Calculation of Beta:

    2017-18 2018-19
      2016-17
    0.004281 0.004535
    Var stock 0.004287
    0.004103 0.004122
    covariance 0.004098
    0.958436 0.909126
    Beta 0.955774

    Cost of Equity:

    Year Kp using CAPM


    2016-2017 =6.46+0.955(15-6.46) 14.6157
    2017-2018 =6.46+0.958(15-6.46) 14.64132
    2018-2019 =6.46+0.909(15-6.46) 14.22286

    Beta from Ace Equity:

    Year Beta Kp
    2016-2017 1.57 =6.46+1.57(15-6.46) 19.8678
    2017-2018 1.37 =6.46+1.37(15-6.46) 18.1598
    2018-2019 0.95 =6.46+0.95(15-6.46) 14.573
    WACC:

    Weight of Weight of
      Equity MV Debt Equity (We) debt (Wd) Ke Kd WACC=We*Ke+Wd*Kd
    8847.8
    14.6157
    2016-17 14885.34196 6 0.627194846 0.372805154 6.81 11.70569
    8123.8
    14.64132
    2017-18 14885.34196 4 0.646930516 0.353069484 7.78 12.2188
    8749.7
    14.22286
    2018-19 14885.34196 2 0.629799151 0.370200849 6.65 11.41938

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