NTPC Green Energy IPO opens today: Should you subscribe to it?

The initial public offering (IPO) of NTPC Green Energy opens for bidding today, that is, on Tuesday, November 19. The PSU firm is selling its shares in the fixed price band of Rs 102-109 apiece. Investors can apply for a minimum of 138 equity shares and its multiples thereafter until Friday, November 22.

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,

NTPC Green Energy is looking to raise Rs 10,000 crore via its initial stake sale, which is entirely a fresh issue of up to 92.68 crore equity shares. The company has reserved shares worth Rs 200 crore for its eligible employees, who will get a discount of Rs 5 per share, while eligible shareholders of NTPC Ltd have shares worth Rs 1,000 reserved for them.

The net proceeds from the issue shall be utilized towards investment in the wholly owned Subsidiary, NTPC Renewable Energy (NREL); for repayment and/or prepayment in full or in part of certain outstanding borrowings availed by NREL; and general corporate purposes.

NTPC Green Energy has reserved 75 per cent of the net offer for the qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will have 15 per cent of the net offer. Remaining 10 per cent of net offer shall be allocated towards retail investors of the issue.

NTPC Green Energy 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 company's portfolio consisted of 14,696 MW, including 2,925 MW of operating projects and 11,771 MW of contracted and awarded projects. It had 15 off-takers across 37 solar projects and 9 wind projects.

Last heard, NPTC Green Energy was commanding a grey market premium (GMP) of less than Rs 1 per share, suggesting a muted pop of less than a per cent for the investors. However, its premium in the unofficial market stood around Rs 1-1.5 over the extended weekend.

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. The company will command a total market capitalization of little Rs 91,000 crore.

IDBI Capital Market Services, HDFC Bank, IIFL Securities 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. Here's what a host of brokerage firms said about the IPO of NTPC Green Energy:

NTPC Green Energy
Rating: Subscribe for long-term
"NTPC Green Energy aims to increase its operational capacity to 6, 11, 9 GW by FY25, FY26E, FY27E respectively from 3.3 GW as of September 2024. But considering its current established capacities and future expanded capacities, this is a pure long-term story. We believe that this issue may be considered for its long-term growth," said Anand Rathi Research.

On valuation parse at the upper price band Rs 108, the issue is asking a marketcap of Rs 91,000 crore and based on FY25E annualized earnings and fully diluted post IPO paid-up capital, the company is asking for a PB of 4.96 times and PE of 259.56 times which appears aggressively priced, it said with a 'subscribe for long-term' rating for the issue.

Reliance Securities
Rating: Subscribe for long-term
NTPC Green benefits from NTPC’s financial strength and long-term relationships with off takers and suppliers, growing its revenues along with strong credit ratings that enable a low cost of debt executing large scale projects. It has deep domain expertise of the management team focusing on new energy solutions, said Reliance Securities.

It is working on solutions like green hydrogen, green chemicals and storage with prudent growth and contributing towards fulfilling India’s net zero goals, it added. "We believe with a prudent business model and strong earnings growth with improved financials and return ratios, we recommend a 'subscribe' to the issue for the long term," Reliance Securities said.

Swastika Investmart
Rating: Subscribe for long-term
NTPC Green Energy is a wholly-owned subsidiary of NTPC. It has a robust, diversified portfolio across geographies and offtakers. The company boasts consistent top-line growth, but temporary profitability/margin fluctuations. However, the issue has an aggressive pricing based on PE ratio, said Swastika Investmart, recommending it for long-term investors only.

Arihant Capital Markets
Rating: Subscribe with caution
NTPC Green Energy is one of the top 10 renewable energy players in India in-terms of operational capacity. It has a strong portfolio of 16,896 MWs including 3,320 MWs of operating projects and 13,576 MWs of contracted and awarded projects as of September 24. The capacity under the pipeline stood at 9,175 MW shows business visibility going forward, said Arihant Capital Markets.

NTPC Green is focused on new energy solutions like green hydrogen, green chemicals and battery storage would be growth levels. It will continue to leverage NTPC group’s economies of scale for projects that will lead to business opportunities with better terms and new technologies will lead to cost reductions going forward, it said with a 'subscribe for long-term' for aggressive investors.

StoxBox
Rating: Subscribe for long-term
NTPC Green Energy leverages NTPC’s five-decade legacy, extensive experience, strategic partnerships, advanced operations and maintenance technologies, said StoxBox. "Given its strategic development and strong financial growth, the company is well-positioned to capitalize on growth opportunities in the renewable sector, we recommend a 'subscribe for long-term' for IPO," it said.

Chola Securities
Rating: Subscribe
NTPC Group aims to expand its non-fossil-based capacity to 45-50% of the portfolio by 2032, including achieving 60 GW of renewable capacity. At a post-issue market cap, NTPC Green's valuation stands at Rs 3,490 crore per GW of FY30e of expected capacity, offering a 40 per cent discount compared to peers when compared to their expected capacity, said Chola Securities.

"Despite its aggressive expansion pipeline, NTPC Green's per-GW valuation significantly trails its peers, offering substantial upside potential for investors. We have a 'subscribe' rating for NTPC Green Energy IPO," it added.

Marwadi Financial Services
Rating: Subscribe
NPTC Green is set to list at a P/E of 208 times with a market cap of Rs 91,000 crore whereas its peer, Adani Green Energy is trading at P/E ratio of approximately 182 times respectively, said Marwadi Financial Services. "We assign 'subscribe' rating to this IPO as the company is promoted by NTPC, long term relationships with offtakers and suppliers and financial strength," it added.

Mehta Equities
Rating: Subscribe with caution
With a robust portfolio of 26,071 MW, including operational, contracted and pipeline projects, NTPC Green demonstrates strong growth potential. Its focus on long-term Power Purchase Agreements (PPAs) with government and public utilities ensures stable revenue streams, while its diversified geographical presence mitigates risk, said Mehta Equities.

"The company is asking for a P/B of 4.96 times and PE of 259.56 times which appears aggressively priced. Supported by NTPC’s financial strength and ambitious renewable energy targets, the company is well-equipped to capitalize on the increasing demand for sustainable energy solutions. We recommend only risk taking investors to 'subscribe' to the IPO for long term only," it said.

Hensex Securities
Rating: Subscribe for long-term
NTPC Green Energy is the largest renewable energy public sector enterprise (excluding hydro) in terms of operating capacity as of September 2024 and power generation in FY24. It is strategically focused on developing a portfolio of utility-scale solar energy projects and utility-scale wind energy projects, as well as projects for PSUs and corporates, said Hensex Securities.

"The company is investing in hydrogen, green chemical and battery storage capabilities and solutions as well as associated technologies. NTPC Green Energy holds a vision of 60 GW RE capacity by 2032. We suggest ‘subscribe’ to the issue with a long term investment perspective," it added.

Master Capital Services
Rating: Subscribe for long term
NTPC Green Energy is one of the top renewable energy players in India and aims to strengthen its position in core solar and wind energy businesses and focus on new geographies and new off-taker customers, said Master Capital Services. "It is investing in new energy solutions. Investors looking to invest can invest in the IPO for the long term," it added.

Canara Bank Securities
Rating: Subscribe for long term
As battery prices decline and economies of scale improve, NTPC Green is poised to enhance its operational margins. Its focus on green hydrogen and energy storage aligns with emerging trends in the renewable energy sector, offering new avenues for growth, said Canara Bank Securities.

"Given its strong financial backing, ambitious expansion plans, and alignment with India’s renewable energy transition, NTPC Green is well-positioned to deliver long-term value to investors. We recommend 'subscribe' to this issue for potential long-term gains" it added.