Global research house, Credit Suisse has announced its decision to downgrade the shares of Tata Power Company to underperform.

Tata Power, which is the largest private power producers in India, had the rating of 'neutral' from the investment bank earlier. Credit Suisse also said that it is reducing its target price to Rs. 83 from Rs. 104 for the shares of the company. It also said cited valuations as one of the reasons for the downgrade and advised the investors to switch to NHPC Ltd and KSK Energy Ventures Ltd.

The investment bank said that the Tata Power's new power plant in Mundra will only become operational during the next financial year and the company is expected to face a loss of Rs. 1,500 - Rs. 1,600 crore per year during the initial few years. The project depends on coal imports from Indonesia and has been facing increased costs because Indonesian authorities raised taxes on export of coal.

During the previous week, Tata Power said its 4,000 MW Mundra ultra mega power project (UMPP) was fully operational with the synchronisation of the fifth 800 MW unit. With the synchronisation of the fifth unit at the plant, the company's total capacity has been expanded to about 8,500 MW, according to the company.

Tata Power shares fell 2.9 per cent to Rs. 98.20 rupees.