The company said in a statement that the sale consideration approved for the defence business is Rs 2,230 crore.
"Tata Power today announced that its board has approved the sale of its defence business to Tata Advance Systems Ltd, a wholly owned subsidiary of Tata Sons, at an enterprise value of Rs 2,230 crore," it said.
Out of this, Rs 1,040 crore is payable at the time of closing and Rs 1,190 crore is payable on achieving certain milestones.
"This is as part of the company's plan to monetise its non-core assets and improve the balance sheet," it added.
The deal is subject to government and other approvals, including that of shareholders.
Commenting on the development, Tata Power Chief Executive Anil Sardana said in a statement:
"Strategic Engineering Division (SED) is a non-core business division of Tata Power. The company has been charting its next phase of growth, for which monetisation of non-core assets is a critical step. This sale will also help in reduction of leverage."
As the company's defence electronics unit, the SED manufactures and assembles missile launchers, electronic warfare equipment, night vision devices and gun systems.
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