Bakrie Group entity has signed an agreement to acquire Tata Power’s 30% stake in Arutmin and associated companies in coal trading and infrastructure.

The move comes as Tata Power facing under-recovery challenges in Mundra UMPP operations and cash flow concerns while the transaction is expected to provide Tata Power additional cash flow and to reduce its consolidated debt.

Subject to certain conditions and restructuring actions, the $500m sale is expected to be complete in the next three months.

However, Tata Power will continue to hold its stake in Indonesian coal company PT Kaltim Prima Coal (KPC) while KPC continues to be a part of the supply chain for coal off-take requirements for Tata Power Group.

Tata Power managing director Anil Sardana said that the proceeds from the sale of Arutmin will provide cash to meet the current challenges for Tata Power.

"We do not expect any impact on the coal supplies to our plants since we stay invested in KPC mines and our coal supply agreement continues as it is," Sardana added.