NTPC Green Energy IPO: GMP subdued as rich valuations spook investors amid volatile markets

The initial public offering (IPO) on NTPC Green Energy opens for bidding on November 19 and the valuations concerns are haunting the market participants including analysts and investors, who are waiting for opportunities to make a quick buck amid the volatile market sentiments.

Experts, so far, have suggested subscribing to the issue only on a long-term basis and indicate that investors should chop their expectations of listing gains, if they have any, considering the aggressive pricing and current volatile market sentiments. Even the grey market premium (GMP) for the issue is hinting towards a flat listing for the investors.

In terms of valuation, the IPO of NPTC Green is priced aggressively at a P/E ratio of 264 times as of FY 2024, which is significantly higher than its peers, said Gaurav Garg, Research Analyst at Lemonn Markets Desk. "The rich valuation suggests that the IPO may be suited for only investors with a high-risk appetite and investing for long term as GMP indicates minimal listing gains," he said.

Market analysts believe that NTPC has commendable growth potential in a growing sector but its high valuation could pose risks for investors investing with a view of short-term gains. They have a positive view on the issue only in the long term with investors having high risk-appetite shall apply for the issue.

 
Rajan Shinde, Research Analyst at Mehta Equities believes that the IPO of NTPC Green Energy brings investors an opportunity to invest in a leading player of India’s renewable energy sector, backed by the formidable resources and expertise of NTPC.

"The company is well-equipped to capitalize on the increasing demand for sustainable energy solutions. Hence, looking at attributes we recommend only risk taking investors to 'subscribe' rating the NTPC Green Energy IPO for long term perspective only," he said.

The Rs 10,000 crore IPO of NTPC Green Energy is entirely a fresh share sale of up to 925,925,926 equity shares with a face value of Rs 10 each. The company is offering its shares in the range of Rs 102-108 apiece and the three-day bidding for the issue will close on Friday, November 22.

NTPC Green had agreements with 15 off-takers across 37 solar and 9 wind projects. However, NTPC Green’s reliance on a small group of utility companies and power purchasers makes it vulnerable to the potential loss or financial instability of these key clients, which could adversely affect its business, financial performance, and overall health, said SMC Global.

"The company’s success and profitability are heavily dependent on the availability and costs of critical resources such as solar modules, solar cells, wind turbine generators, and other essential equipment for its renewable energy projects," the brokerage added, giving a 'neutral' stance on the issue.

Last heard, NPTC Green Energy was commanding a grey market premium (GMP) of Rs 1-1.5 per share, suggesting a listing pop of nearly 1 per cent for the investors. However, its premium in the unofficial market slipped below Rs 1 over the extended weekend amid the rising selling pressure in the markets.

NTPC Green plans to increase its operational capacity by 20 times to 60GW by FY32F, from 3.3GW currently. Its total portfolio stands at 26.1GW, said InCred Equities. "Long-term PPAs drive predictable cash flows are growing at a 46.82 per cent CAGR & consistent Ebitda margin above 85 per cent. India's renewable capacity has quintupled to 201GW in the last decade," it said.