Tata Power is exploring the establishment of an infrastructure investment trust (InvIT) for its near 3 gigawatt (GW) renewable energy portfolio to deleverage its balance sheet by a fourth and raise growth equity from investors, said people with knowledge of the matter. If it goes ahead, Tata Power will join Larsen and Toubro, Reliance Industries, Sterlite and Piramal Enterprises in creating investment trusts for operational infrastructure assets.

Tata Power, the country's largest integrated power company, has 2,549 MW of renewable capacity and a presence in 14 states across India. Another 400-500 MW is in the pipeline. It's largely a solar portfolio on account of its $1.4 billion acquisition of Welspun Energy's assets in June 2016.

The plan is to hive off the operating assets in the InVIT along with Rs 10,000 crore of debt. The company is seeking to raise Rs 6,000-7,000 crore ($750 million-1 billion) of equity from infrastructure-focussed investors, said people familiar with the plan. A few investors have been informally sounded out to gauge interest as well, according to one of the officials mentioned above, but this could not be independently verified.

A final decision is expected in the coming weeks.

A Tata Power spokesperson declined to comment on what it characterised as speculation.

Projects in the pipeline will get loaded onto the InvIT platform once ready. The InvIT will also have a mandate to make brownfield acquisitions, said the people cited above.

The operating portfolio clocked Rs 2,053 crore in FY19 ebitda (earnings before interest, tax, depreciation and amortisation). The company therefore is looking at an eightfold EV/ebitda valuation from investors. It can get four-five investors on board for equity support as per the rules.

The company has already embarked on a restructuring exercise of its green energy portfolio that was scattered in three different entities–parent Tata Power Ltd, wholly owned subsidiary Tata Power Renewable Energy Ltd (TPREL) and Welspun (Walwhan Renewable Energy Ltd or WREL)--by carving out 380 MW of solar and wind assets from the former and merging it with TRPEL by a scheme of arrangement. WREL remains a standalone subsidiary of TPREL

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