Tata Power is now leading the country's renewable energy transition following its withdrawal from building new coal-fired power plants.
Report author Simon Nicholas, Energy Finance Analyst at IEEFA, says Tata Power's focus on renewables makes sense given the major energy transformation now occurring.
"The company's plan, 'Strategic Intent 2025' calls for up to 70 per cent of new capacity additions to come from solar, wind and hydro through to 2025," said Nicholas.
"This represents a significant departure from the accepted wisdom of just a few years ago that a major expansion of coal-fired power would be required to serve India's growing electricity demand."
The majority of Tata Power's thermal capacity is now centred on its Mundra coal-fired power plant -- one of the biggest power plants in India -- which experienced losses reaching $191m for the first three-quarters of FY2018-19.
"The Mundra plant is making consistent, significant losses that are dragging back the company's overall financial performance," Nicholas said in a statement.
Tim Buckley, IEEFA's Director of Energy Finance Studies, said Tata Power's shift mirrors the transition underway within the Indian power sector as a whole, driven by least cost renewable energy.
"The shift away from new coal-fired power is moving faster than anyone had predicted," said Buckley.
"The current Indian fiscal year has seen net coal-fired power additions come close to ceasing altogether.
"Peak coal-fired power capacity in India is on the horizon, and growing electricity demand will be served by current coal power capacity and rapidly growing renewable energy capacity.
"Tata Power encapsulates this rapid transition."
With more than 40 gigawatts of existing coal-fired power plants under financial stress in India, Tata Power is seeking to only add new coal-fired power capacity via fire-sale acquisition, at 30-40 per cent of historical investment. It no longer plans to build new coal-fired power plants.
Tata Power's renewables operations are profitable, recording earnings before interest, depreciation and amortisation (EBITDA) of $249m in FY2017-18, and an EBITDA margin of 89 per cent.
The company is also leading India in rooftop solar, electric vehicle charging, and via its recent installation of India's first grid-scale battery storage system alongside Mitsubishi Corporation and AES India.
However, Tata Power will need to increase its renewables installation rate significantly if it is to meet its Strategic Intent target of reaching up to 11.3GW of non-fossil fuel power capacity by 2025.
"Leading utilities like Tata Power are assisting to make the energy transition in India's power system a reality," added Nicholas.