NTPC Green Energy IPO: A New Dawn for Renewable Investments

The initial public offering (IPO) of NTPC Green Energy, the renewable energy arm of NTPC, has generated significant buzz in the financial markets. Launched for subscription on November 19, the IPO was fully subscribed by Day 3, attracting an impressive 2.4 times the bids for the shares on offer. This overwhelming response highlights the growing interest in renewable energy investments, particularly in India.

Subscription Details

Retail investors played a pivotal role in the bidding process, subscribing to the issue 3.39 times. Non-institutional investors (NIIs) showed a robust interest as well, with an 81% subscription rate. Qualified institutional buyers (QIBs) also demonstrated confidence in the offering, with a subscription rate of 3.32 times. The IPO, which is entirely a fresh equity sale amounting to ₹10,000 crore, will remain open for bidding until November 22.

Purpose of the Offering

The proceeds from this IPO are earmarked for several strategic initiatives. Primarily, the funds will be directed towards investments in NTPC Renewable Energy, aimed at expanding its renewable energy portfolio. Additionally, the capital will be utilized for debt repayment and other general corporate purposes, reinforcing the company’s financial stability and growth trajectory.

Key Dates

The NTPC Green IPO kicked off on November 19 and is set to close on November 22. The allotment of shares will be completed by November 25, with the listing scheduled for November 27. Investors are keenly awaiting these dates, as they will determine the future performance of the stock in the market.

Grey Market Premium (GMP)

As of now, the Grey Market Premium (GMP) for NTPC Green stands at ₹1, indicating a modest premium of 1% over the issue price. This suggests a cautious optimism among investors regarding the stock’s potential performance post-listing.

Price Band and Lot Size

The price band for the NTPC Green IPO has been fixed at ₹102-108 per share. Investors can bid for a minimum of 138 shares in one lot, with the option to apply for multiple lots thereafter. This pricing strategy aims to make the offering accessible to a broad range of investors.

Analyst Recommendations

Market analysts have largely recommended subscribing to the NTPC Green IPO, citing the company’s prudent business model and strong earnings growth. Reliance Securities noted that NTPC Green Energy Limited (NGEL) possesses deep domain expertise, focusing on innovative energy solutions such as green hydrogen and storage technologies. They emphasized the company’s role in contributing to India’s net-zero goals.

SBI Securities projected exponential growth for NTPC Green, estimating a compound annual growth rate (CAGR) of 79% in revenue, 117.2% in EBITDA, and 123.8% in profit after tax (PAT) over the FY24-27E period. They advised investors to subscribe at the cut-off price for long-term gains.

Geojit also echoed a positive sentiment, stating that at the upper price band of ₹108, NTPC Green is fairly priced with a price-to-book value (P/Bv) of 4.9x based on FY25E annualized financials. They assigned a “Subscribe” rating for long-term investment, highlighting the company’s strong brand recall and promising industry outlook.

About NTPC Green Energy

NTPC Green Energy, a subsidiary of NTPC, stands as the largest renewable energy public sector enterprise in India (excluding hydro) in terms of operating capacity. As of September 2024, the company boasts an operational capacity of 3,220 MW from solar projects and 100 MW from wind projects, strategically located across more than six states. This diverse portfolio helps mitigate risks associated with location-specific generation variability.

The company has witnessed remarkable growth, with revenue from operations increasing at a CAGR of 46.82% from ₹910.42 crore in FY22 to ₹1,962.6 crore in FY24. Profit after tax has also surged, growing at a CAGR of 90.75% from ₹94.74 crore in FY22 to ₹344.72 crore in FY24.

Conclusion

The NTPC Green Energy IPO represents a significant opportunity for investors looking to tap into the burgeoning renewable energy sector in India. With strong backing from retail and institutional investors, a well-defined growth strategy, and a commitment to sustainable energy solutions, NTPC Green is poised for a promising future. As the world increasingly shifts towards renewable energy, this IPO could be a stepping stone for investors aiming to align their portfolios with sustainable practices.