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Tata Power launches a perpetual Debentures offering of Rs 1,500 crore

01 Jun 2011 Evaluate

Tata Power Company has launched an offering of Perpetual Debentures of Rs 1,500 crore. The coupon (which may be deferred at the Company's option) on the debentures is set at 11.4% p.a., with a step up provision if the debentures aren't called after 10 years. The mandated Joint Lead Arrangers for the issuance are Standard Chartered Bank and Yes Bank.

The unique features of the debentures are that they are perpetual in nature with no maturity or redemption and are callable only at the option of the Company. These debentures rank senior only to share capital of the Company. This provides equity characteristics to these ‘hybrid' debentures. Further, this instrument is rated AA / positive by CRISIL and CARE AA by CARE.

Perpetual capital instruments are a form of debt with equity like features and provide several benefits to users. They allow a better balancing of capital structure, enhance financial flexibility, expand the choice of instruments that can be issued to access debt markets and enable diversification in the investor base. For investors, such instruments offer a relatively higher return to compensate for the highly complex nature and subordinated positions.

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