Tata Power on Friday said it has received the National Company Law Tribunal’s (NCLT) approval to merge its wholly-owned subsidiary Coastal Gujarat Power (CGPL) with itself. The merger of CGPL, which operates 4,000 MW lossmaking ultra mega power project in Gujarat, will provide the parent a tax break of Rs 10,000 crore over several years.

The composite scheme of merger will help streamline corporate structure and consolidate assets and liabilities of CGPL within Tata Power. It will also help in efficient utilisation of capital for the enhanced development and growth of the consolidated business in one entity, the company said.

It is believed the merger will help Tata Power secure cheaper loans for the UMPP project. Over the last 10 years, CGPL has made cumulative losses of Rs 11,000 crore till FY21 due to aggressive bids and adverse coal and currency movement. The tax break is expected to be value-accretive for Tata Power as its profitability will improve on deleveraging and asset divestment gains, according to analysts.

On August 12, 2020, Tata Power proposed the merger of its three wholly-owned subsidiaries, CGPL, Tata Power Solar Systems and Af-Taab Investment Company with the parent company for greater synergies in financing, compliance and oversight.

The company said the merger was part of a strategic initiative to simplify the group holding structure and a broader plan to set the company for future growth through fiscal consolidation and strengthening of balance sheet. “The merger aims to achieve the long-term objectives by facilitating efficient use of cash and making available corporate support to the businesses of the said wholly-owned subsidiaries as needed,” the company said.