NTPC Green Energy IPO

NTPC Green Energy IPO: Powering the Future of Renewable Investments

The highly anticipated NTPC Green Energy IPO, priced with a face value of ₹10 per equity share, marks a major move into the renewable energy sector. With a target to raise ₹10,000 crore through this IPO, NTPC Green Energy Limited (NGEL), a subsidiary of NTPC Limited, has received the final nod from the Securities and Exchange Board of India (SEBI) as of Monday. This SEBI approval—referred to as a “final observation”—indicates that the regulatory green light has been granted, following NGEL’s submission of its IPO filing on September 18, 2024.

Key Features of the NTPC Green Energy IPO

The NTPC Green Energy IPO is entirely a fresh issue of equity shares, including a specific reservation for NTPC employees with a discount available in the employee subscription portion.

Anticipated IPO Launch and Roadshows

Expected to launch in the first week of November, this ₹10,000 crore IPO will soon be open for public subscription. Although the official date remains unconfirmed, NTPC Green Energy has planned significant investor roadshows domestically in Mumbai and internationally, particularly in Singapore.

Shareholders’ Quota Advantage

Investors who hold NTPC shares as of the date the RHP (Red Herring Prospectus) is filed can participate in the IPO under a special shareholders’ category, increasing their odds of securing an allotment. Interested investors are encouraged to buy at least one NTPC share now to maximize their chances of qualifying for this quota.

Investor Insights from Market Analysts

Market analysts at ICICI Securities recommend a strong “Buy” for NTPC Green Energy’s IPO, emphasizing NGEL’s large-scale operational capacity of 3.2 GW and a substantial development pipeline of 11 GW. Not only is NGEL targeting utility-scale renewable projects, but it is also entering partnerships with major corporate players and public sector units (PSUs) to fulfill their green energy needs, expected to yield higher returns than typical utility-scale projects. NTPC’s broader vision includes reaching a renewable energy capacity of 60 GW by FY32.

Financial Metrics & Valuation

ICICI Securities forecasts an annual revenue of ₹11,700 crore and EBITDA in the range of ₹9,500 to ₹10,000 crore for NGEL, with EV to EBITDA being the preferred valuation metric for its renewable portfolio. They maintain a target price of ₹495 on NTPC, spotlighting NGEL’s green expansion as a vital strategy as NTPC diversifies from its traditional thermal power base.

Strategic Significance for Green Energy Investors

With global energy trends increasingly shifting towards renewables, investors are keen to gain exposure to green energy-focused stocks like NTPC Green Energy, as highlighted by Kranthi Bathini, director of equity strategy at WealthMills Securities.

Fund Allocation and NTPC’s Green Vision

Out of the total proceeds, ₹7,500 crore will support investments in NTPC Renewable Energy Limited (NREL) to manage debt and for corporate purposes. The strategic use of funds underscores NTPC Green Energy’s commitment to building a sustainable energy future. As of June 30, 2024, NGEL leads the renewable public sector energy market (excluding hydro) with 14,696 MW in its portfolio, including operational projects and a pipeline totaling 25,671 MW, as detailed in a CRISIL report.

Extensive Renewable Portfolio and Growth

NGEL’s renewable portfolio spans multiple states, balancing location-specific variability through projects across more than six regions. As of June 30, 2024, the company had 2,925 MW of active solar and wind projects, with 11,771 MW contracted for future implementation, establishing it as a leader in sustainable energy.

Growth Trajectory and Financial Performance

NTPC Green Energy has showcased impressive growth, with revenue from operations increasing at a CAGR of 46.82%, reaching ₹1,962.60 crore in FY24, while profit after tax surged by 90.75% to ₹344.72 crore. In Q1 FY25 alone, revenues hit ₹578.44 crore, with a profit after tax of ₹138.61 crore.

Key Investment Highlights:

Largest renewable energy public sector company (excluding hydro) as of June 2024
Diverse portfolio of solar and wind assets across multiple states
Strategic focus on utility-scale projects and corporate partnerships for green energy

Conclusion:

With renewable energy growth, NTPC Green Energy’s IPO presents a promising entry point for investors looking to support sustainable development. This IPO not only diversifies NTPC’s portfolio but also enables investors to participate in India’s renewable journey, aligning with national goals for a greener future.