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India's largest power producer NTPC Ltd aims to sell a 20% stake in its green energy business this fiscal year, expecting to raise up to 30 billion Indian rupees ($363.97 million), three government sources said.

The deal marks the first green transaction by an Indian state company, which has drawn interest from investors, such as Canada Pension Plan Investment Board (CPPIB), Malaysia's Petronas and Brookfield.

The decision to sell 20% to strategic investors will be followed by an initial public offering of NTPC Green Energy Ltd (NGEL) next financial year, two of the sources, senior government officials with direct knowledge of the matter, said.

India's renewables sector is among the country's top five industries attracting the highest levels of foreign investment this year. Its percentage share of total foreign direct investment inflows has risen to 5% in April-September 2022 against 3.3% in the same period last year, data from India's commerce ministry showed.

NTPC was initially planning to raise funds through a public share sale. The company is now looking at first selling a 20% stake through a private placement as this would provide a valuation for an IPO, the third source said. The size of the stake sale and the deal value has not been previously reported.

NTPC did not respond to requests for comment.

INVESTMENTS

NTPC plans an investment of more than 2.5 trillion rupees in the next 10 years to raise the share of non-fossil energy its portfolio to 45% from the present 9.41%. Its remaining capacity is coal-fired.

It is open to selling a total 49% stake in its green energy unit in tranches, the sources said.

"The proposal has been moved by the ministry of power for consideration by the federal cabinet. The stake sale is targeted for this financial year," one of the sources said.

India's financial year starts on April 1 and runs through to March.

To test investor appetite for a share placement, NTPC in September floated an Expression of Interest to sell minority stake in NGEL. It received 13 bids from investors also including ArcelorMittal, India’s NIIF and Abu Dhabi-listed TAQA.

NTPC Green Energy will be the driver for the parent company's non-fossil businesses. The company has committed to adding 60 gigawatts of renewable energy by 2032 on a total group capacity of 130 gigawatts.

On Tuesday, the company said it passed 1 gigawatts annual capacity in the renewable energy segment.

NTPC has said it will not set up new coal-based projects but is considering a few expansion projects at its existing pit-head plants. NTPC's total capacity is 70.7 gigawatts.

India which has set a goal to become net zero by 2070, has committed to achieve 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030.

The country targets 500 gigawatts of renewable energy generation by 2030. Renewable energy sources including wind, hydro and biomass constitute 30% of the country's present installed capacity of 409 gigawatts.