The initial public offering (IPO) of NTPC Green Energy saw a mild response from the investors during the first day of the bidding process. The issue, which kicked-off for bidding on Tuesday, November 19, was mostly subscribed by retail investors and shareholders of its parent NTPC Ltd.
NTPC Green Energy is selling its shares in the price band of Rs 102-108 apiece. Investors can apply for a minimum of 138 shares and its multiples thereafter. It is looking to raise Rs 10,0000 crore via IPO, which is entirely a fresh share sale of 92,59,25,926 equity shares.
According to the data, the investors made bids for 12,54,75,948 equity shares, or 21 per cent, compared to the 59,31,67,575 equity shares offered for the subscription by 1.00 pm on Tuesday, November 19. The three-day bidding for the issue will conclude on Friday, November 22.
The allocation for retail was subscribed 89 per cent, while the portion reserved for non-institutional investors (NIIs) investors saw a subscription of only 8 per cent. Portions for employees and shareholders were booked 12 per cent and 37 per cent, respectively. However, the quota set aside for qualified institutional bidders (QIBs) quota was to see any significant bids as of the time.
Incorporated in April 2022, NTPC Green Energy, promoted by NTPC under Ministry of Power, is a renewable energy company that focuses on undertaking projects through organic and inorganic routes. The company had an operational capacity of 3,071 MW from solar projects and 100 MW from wind projects across six states as of August 31, 2024,
The grey market premium of NPTC Green Energy has taken a big hit amid the rising volatility and muted bidding on day one. Last heard, the company was commanding a premium of Rs 0.7-1 in the unofficial market, suggesting a flat listing for the investors. However, the premium in the grey market stood around Rs 25, before the price band for the issue was announced.
Brokerage firms have mostly had a positive view on the issue but suggest it for a long-term subscription only. They are positive on the company's strong parentage, rising demand for renewable energy, long term agreement for the clients, positive cash flows and cash rich nature of the business. However, rich valuations and any turnaround in government policies are its major concerns.
Divyam Mour, Research Analyst at SAMCO Securities has cited two major reasons to skip this issue. Its capacity utilization factor (CUF), a critical measure of a plant's electricity generation efficiency, is relatively lower for its solar and wind projects compared to competitors, he said.
"Additionally, an analysis of the company's price-to-earnings (P/E) ratio against its peers indicates overvaluation, raising concerns about its long-term wealth creation prospects. Consequently, investors are advised to avoid the IPO," Mour added in his note.
NTPC Green Energy allotted 36,66,66,666 shares to anchor investors to mop up Rs 3,960 crore at a price of Rs 108 per share. For the quarter ended on June 30, 2024, NTPC Green Energy reported a net profit of Rs 138.61 crore with a revenue of Rs 607.42 crore. The company clocked a bottomline of Rs 344.72 crore with a revenue of Rs 2,037.66 crore for the financial year 2023-24.
NTPC Green Energy leverages the strong parentage of NTPC Limited, a diversified renewable portfolio, and a focus on solar and wind projects. The company shows good operational efficiency and has a growing pipeline of projects backed by strategic partnerships, said Nirmal Bang Institutional Equities.
"However, its reliance on power purchase agreements (PPAs) and regulatory uncertainties may affect financial stability. Compared to peers, the company’s ROE is lower, owing to lower leveraging. High valuation multiples, makes us believe that the company is fully priced relative to peers," it added with a 'neutral' rating for the issue.
The company has reserved shares worth Rs 200 crore for its eligible employees,, while eligible shareholders of NTPC have shares worth Rs 1,000 reserved for them.75 per cent for the net offer has been reserved for qualified institutional bidders, while non-institutional investors will get 15 per cent of the net offer. Retail investors will have only 10 per cent of the net offer.
IDBI Capital, IIFL Securities, HDFC Bank and Nuvama Wealth Management are the book running lead managers of the NTPC Green Energy IPO, while Kfin Technologies is the registrar for the issue. Shares of the company shall be listed at both BSE and NSE on Wednesday, November 27.