NTPC Green Energy IPO: A Bright Spot Amidst Market Caution
The Indian stock market has recently witnessed a wave of Initial Public Offerings (IPOs), but investor sentiment has been somewhat cautious. However, the NTPC Green Energy IPO has emerged as a notable exception, capturing the attention of retail investors and demonstrating robust demand. Launched on November 19, 2023, this IPO has quickly gained traction, with the retail segment fully booked within hours of its opening.
Subscription Status and Investor Interest
As of the second day of bidding, the NTPC Green Energy IPO had been subscribed 0.93 times overall. The retail portion, in particular, stood out, being oversubscribed by 2.38 times. In contrast, the Non-Institutional Investors (NII) segment saw a subscription of only 0.34 times, while Qualified Institutional Buyers (QIBs) accounted for 0.75 times of their allotted shares. The first day of bidding saw a 33% subscription rate, with retail investors leading the charge, subscribing 1.33 times their allotted shares. This strong interest from retail investors is indicative of the growing confidence in NTPC Green Energy as a promising investment opportunity.
Background of NTPC Green Energy
NTPC Green Energy is a subsidiary of NTPC Ltd, which is recognized as the leading public sector company in renewable energy (excluding hydro) for the fiscal year 2024, based on operational capacity and power generation. The company is poised to play a significant role in India’s transition to sustainable energy, with plans to expand its non-fossil fuel capacity to 60 GW by 2032. This ambitious goal aligns with the global shift towards renewable energy sources and positions NTPC Green Energy as a key player in the sector.
Financial Insights and Valuation
Before the IPO, NTPC Green Energy successfully raised ₹3,960 crore from anchor investors, showcasing strong institutional interest. The IPO is estimated at ₹10,000 crore and consists solely of newly issued equity shares, with no Offer For Sale (OFS) component. The funds raised will be allocated for investments in NTPC Renewable Energy Limited (NREL), debt repayment, and general corporate purposes.
According to the Red Herring Prospectus (RHP), NTPC Green Energy’s valuation is being compared to peers such as Adani Green Energy Ltd and ReNew Energy Global PLC, which have Price-to-Earnings (P/E) ratios of 259.83 and 47.05, respectively. Analysts from Indsec Securities have noted that the IPO’s pricing appears high compared to these competitors, which are trading at an EV/EBITDA range of 38-40x. Despite this, they recommend a "Subscribe for Long-Term" stance, citing NTPC’s robust execution capabilities and favorable industry growth trends.
Analyst Recommendations
Brokerage firm SBICAP Securities has provided a detailed analysis of the IPO, highlighting significant growth potential. They project Revenue, EBITDA, and PAT to expand at compound annual growth rates (CAGRs) of 79.0%, 117.2%, and 123.8%, respectively, over the FY24-27E period. Their calculations indicate that the upper price band for the issue corresponds to FY25E/FY26E/FY27E EV/EBITDA multiples of 35.3x, 18.3x, and 10.1x, respectively. They recommend subscribing to the issue at the cut-off price for long-term gains.
Grey Market Premium and Listing Expectations
As of the latest updates, the NTPC Green Energy IPO is trading at a grey market premium (GMP) of ₹0.80. This suggests that investors are willing to pay a slight premium over the issue price of ₹108, with an estimated listing price of ₹108.8 per share. However, the GMP has shown a downward trend, indicating some volatility in investor sentiment.
Conclusion
The NTPC Green Energy IPO stands out in a market characterized by caution and uncertainty. With strong retail interest, a solid backing from NTPC Ltd, and ambitious growth plans in the renewable energy sector, this IPO presents an intriguing opportunity for investors. While analysts express some concerns about the pricing relative to competitors, the long-term growth potential and the company’s strategic direction make it a compelling option for those looking to invest in the future of sustainable energy in India. As the bidding period concludes on November 22, 2023, investors will be keenly watching the final subscription numbers and the subsequent market performance of NTPC Green Energy shares.