International rating agency, Moody's has downgraded Tata Power's corporate family from the B1 rating earlier to Ba3.

The shares of Tata Power Ltd, which is the largest private-sector power utility in India, fell 2 per cent after the downgrade by the rating agency. The shares of the company were trading 2 per cent lower at Rs 101.90. the shares have touched a low of Rs 101.30 and a high of Rs 103.50 during the day.

Ray Tay, associate vice-president at Moody's said, "The downgrades reflect the deterioration in Tata Power's credit quality as a result of the impact of weak coal prices on its Indonesian coal mines, as well as the continuing uncertainty related to unresolved bank waivers and the tariff renegotiations for its Mundra Ultra Mega Power Project."

According to several reports, the company is asking for higher price for the electricity produced at its Mundra UMPP project to cover costs. It is believed that the company has already lost as much as Rs. 3,000 crore in equity investment in the Mundra project since it started producing electricity. The company has to purchase expensive coal imports for fuelling its projects and this is driving up costs for the project.

Tata Power Company has the total generation capacity of 6,099 MW as of September 2012.