India's largest private sector-integrated power company Tata Power, which is tackling a high debt burden, is in the fundraise mode and is exploring options to monetize its renewable energy assets through the infrastructure investment trust ( InvIT) route, multiple sources with knowledge of the matter told Moneycontrol. InvITS are instruments which work like mutual funds and enable direct investment of money from individual and institutional investors in infrastructure projects to earn a small portion of the income as return. Under Sebi norms, both public & private InvIT's can be listed.
"The company is exploring the InvIT route for select renewable energy assets and has initiated preliminary discussions for the same with advisors and Tata Sons, though a final call has not been taken. If the green signal is given, the company may look at raising a minimum of Rs 4,000 crores via this route," said one of the sources.
"In the InvIT, Tata Power may look at putting in all operational renewable energy assets with a one year plus track record. The solar assets which they acquired from Welspun will be beneficial for this move. A lot of the InvIT's that are happening now are aimed at deleveraging the balance-sheet," added a second source. The consolidated debt burden of Tata Power stood at Rs 48,506 crores as of on March 31.
At the company's 100th annual general meeting held recently in Mumbai , Tata Sons Chairman N Chandrsekaran alluded to the debt reduction strategy and said, "On the debt level side, we did close a couple of transactions to sell some of the cross holdings that Tata Power had in some of the Tata Group companies. We continue to find ways in which we can bring debt level further down primarily by selling non-core assets."
"Foreign investors, especially pension funds, insurance companies and infrastructure funds are keen on Indian InvIT’s because it provides them a long term source of stable yield play. Also, Indian infrastructure developers need to keep churning their assets to raise capital. Private InvIT’s are becoming increasingly popular now due to tax benefits," said a senior investment banker who closely tracks the infrastructure sector.
In response to an email query from Moneycontrol, a Tata Power spokesperson said, "As a company, we do not wish to comment as the story is speculative."
In June 2016, Tata Power signed an agreement with the Welspun Group to acquire the latter's 1.1 GW green energy portfolio for an estimated $1.4bn.
According to the company's 2019 annual report, Tata Power had an operational generation capacity of 10,957 MW from various fuel sources - thermal (coal, gas and oil), hydroelectric, renewable energy (wind and solar PV) and waste heat recovery. The renewable energy segment accounted for 2,549 MW of the total capacity and has a pan-india presence across 14 states across India (Maharashtra, Gujarat, Madhya Pradesh, Tamil Nadu, Karnataka, Rajasthan, Andhra Pradesh, Bihar, Delhi, Haryana, Jharkhand,Punjab, Telangana and Uttar Pradesh).