ICRA has reaffirmed the 'A1+' rating to the commercial paper/short term debt programme of Tata Power Company aggregating to Rs 10 billion (enhanced from Rs 5 billion). ICRA also has a long-term rating of 'AA' (negative) outstanding on the Rs 26 billion non-convertible debenture programme of Tata Power. 

The reaffirmation of the short-term rating takes into account the favourable financial profile of Tata Power on a standalone basis characterised by healthy profitability levels and comfortable capital structure, which is also aided by the stable cash flows generated from the company's operations in the Mumbai License Area.

The rating also favourably takes into account the strong financial flexibility arising from the company's association with the Tata Group. While the debt levels on a consolidated basis are high, the 'non-recourse' nature of most of the debt on the books of the subsidiaries, long maturity of the existing debt on its own books and the company's established track record across the value chain in the power sector provide comfort from the credit perspective. 

The company has also witnessed healthy augmentation in its generating capacity with the commissioning of Mundra UMPP (4000 MW) and Maithon power project (1050 MW) in recent fiscals. While the Maithon power project is expected to provide healthy project returns in the long term as the tariff structure is based on regulated returns, the Mundra UMPP on standalone basis remains an economically unviable project at current tariff levels.

Due to the revision in the Indonesian mining laws which adversely impacted the company's coal procurement cost for the project, a final order on 'compensatory tariff' by CERC is awaited and its timely implementation remains crucial for the company.

ICRA further notes that the extent of support provided by Tata Power to Mundra UMPP, going forward, so as to meet the latter's debt obligations would remain a key rating sensitivity. 

Shares of the company declined Rs 2.95, or 3.27%, to settle at Rs 87.40. The total volume of shares traded was 823,000 at the BSE (Thursday).