Moody's upgrades Tata Power to Ba1 from Ba2 amid stable outlook
Tata Power Company to Ba1 from Ba2 and maintained a stable outlook while observing that the company's underlying business and financial profile will remain stable at least over the next 12 to 18 months.
«The rating upgrade to Ba1 is driven by Tata Power's solid financial metrics, which are projected to remain above the upgrade trigger set for the earlierBa2 rating,» Moody's Analyst Yong Kang said.
In a note, Moody's said it could upgrade Tata Power's rating if the company's standalone credit quality improves, such that its CFO pre- WC/debt rises above 13%on a sustained basis.
Tata Power's rating incorporates the company's standalone credit quality and a one-notch uplift for shareholder support in Tata Sons, the note said adding that company's standalone credit quality is supported by predictable cash flow from its distribution businesses that benefit from a stable regulatory framework, and from its fixed-tariff long-term power purchase agreements (PPAs) for its renewable generation capacity.
Under Moody's base case projection, Tata Power's operating cash flow pre-working capital to debt (CFO pre- WC/debt) will remain solid at 9%-11% over the next two to three years. Although the projected credit metrics are lower than the actuals recorded in fiscal 2023, Moody's expects Tata Power to be able to sustain these credit metrics.
Tata Power's takeover of distribution companies in Odisha and the subsequent improvement in its operations, underpinned by declining electricity losses, have strengthened its business profile, the note said.
