Analysts bullish on NTPC Green Energy IPO; eye long-term potential

NTPC Green Energy's IPO opens for public subscription from Tuesday, November 19, 2024, to Friday, November 22, 2024. Brokerages have weighed in on the offering, with recommendations as follows

NTPC Green Energy IPO: Brokerages remained bullish on the much-awaited initial public offering (IPO) of NTPC's renewable energy arm, NTPC Green Energy IPO, set to open for public subscription on Tuesday, November 19, 2024. Market analysts broadly recommend subscribing to the public offering for its long-term potential. The bidding for anchor investors for the NTPC Green Energy IPO is scheduled today.

 

Before delving into brokerage reports, here are the key details of the NTPC Green Energy IPO:

 

NTPC Green Energy IPO details  

The Rs 10,000 crore offering of NTPC Green Energy IPO is a book-built issue comprising an entirely fresh issue of 92,59,25,926 shares. The price band for the IPO is Rs 102-108 per share, with a lot size of 138 shares. Retail investors will need a minimum of Rs 14,904 to bid for one lot of 138 shares.

 

 

The subscription window will open tomorrow and close on Friday, November 22, 2024. The basis of allotment will be finalised on Monday, November 25, 2024, and shares will be credited to demat accounts on Tuesday, November 26, 2024. NTPC Green Energy shares are likely to be listed on NSE and BSE on Wednesday, November 27, 2024. 

NTPC Green Energy IPO registrar and lead managers 

KFin Technologies is the registrar for the IPO. The book-running lead managers are IDBI Capital Market Services, HDFC Bank, IIFL Securities, and Nuvama Wealth Management.

 

NTPC Green Energy IPO objective 

As per the Red Herring Prospectus, NTPC Green Energy plans to use the net proceeds for funding investments in its wholly-owned subsidiary, NTPC Renewable Energy (NREL), to repay or prepay certain outstanding borrowings, and for general corporate purposes.

 

NTPC Green Energy IPO grey market premium (GMP)  

The grey market premium (GMP) for NTPC Green Energy's unlisted shares fell on Monday. The shares were quoted at a premium of Re 1 over the upper end of the IPO price, translating to a GMP of 0.93 per cent. This is a decline of Rs 2 from the Rs 3 premium reported on Friday, November 14, 2024, according to sources tracking grey market activity.

 

Should you Subscribe to the NTPC Green Energy IPO?  

 

Reliance Securities: Subscribe for long-term  

Brokerage firm Reliance Securities recommended subscribing to the IPO for its long-term potential. Analysts highlight NTPC Green Energy's financial strength, strong credit ratings, and expertise in executing large-scale projects. The company’s focus on new energy solutions like green hydrogen and storage positions it well to contribute to India’s net-zero goals.  

 

“We believe the prudent business model, strong earnings growth, and improved financials justify subscribing to the issue for the long term,” Reliance Securities added.

 

SBI Securities: Subscribe for long-term  

SBI Securities also recommends subscribing to the IPO for the long term. At the upper price band of Rs 108, NTPC Green Energy is valued at an FY24 EV/Ebitda of 53.4x based on post-issue capital.  The brokerage projects NTPC Green Energy's operational capacity to grow to 6/11/19 GW by FY25E/FY26E/FY27E from 3.3 GW in September 2024. Revenue, Ebitda, and PAT are expected to grow at CAGRs of 79 per cent, 117.2 per cent, and 123.8 per cent, respectively, during FY24-27E.  

 

“At the upper price band, the issue is attractively priced, and we recommend investors subscribe to the issue for long-term growth,” SBI Securities said. 

Mehta Equities: Subscribe for long-term

Rajan Shinde, research analyst at Mehta Equities, believes the NTPC Green Energy IPO offers investors an opportunity to invest in a leading player in India’s renewable energy sector, backed by NTPC's formidable resources and expertise.  

 

Shinde further pointed out that with a robust portfolio of 26,071 MW, including operational, contracted, and pipeline projects, the company 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 helps mitigate risks. He also points out that NTPC Green's strategic expansion into green hydrogen, green chemicals, and battery storage further enhances its growth prospects, positioning it at the forefront of India’s energy transition.  

 

In terms of valuation, at the upper price band of Rs 108 per share, the issue is asking for a market capitalization of Rs 91,000 crore. Based on FY25 annualised earnings and fully diluted post-IPO paid-up capital, the company is demanding a PB of 4.96x and a PE of 259.56x, which Shinde considered aggressively priced.  

 

“Supported by NTPC’s financial strength and ambitious renewable energy targets, the company is well-positioned to capitalize on the growing demand for sustainable energy solutions. Hence, considering these attributes, we recommend only risk-taking investors to subscribe to the NTPC Green Energy IPO for a long-term perspective,” Shinde added.  

 

Swastika Investmart: Subscribe for long-term

Analysts at Swastika Investmart have also recommended that investors subscribe to the NTPC Green Energy public issue for the long term, citing the company's robust and diversified portfolio across geographies and offtakers.  

 

In a research note, the analysts emphasised the company’s consistent top-line growth but cautioned about temporary profitability and margin fluctuations. They noted that, based on the PE ratio, the pricing appears aggressive. 

    About NTPC Green Energy 

NTPC Green Energy, a fully owned subsidiary of 'Maharatna' NTPC, stands as India's leading non-hydro renewable energy public sector company. As of September 30, 2024, it operates with a capacity of 3,320 MW, consisting of 3,220 MW of solar and 100 MW of wind projects spread across six states. NTPC Green Energy earns revenue by selling solar and wind power to Indian government agencies and public utilities through Power Purchase Agreements. NTPC Green Energy's net profit attributable to the owners of the parent company stood at Rs 176.65 crore in the first half of the current fiscal year (H1FY25), reflecting a decline of 15.13 per cent from Rs 208.15 crore reported during the same period in the previous fiscal year, according to the RHP. 

 

NTPC Green Energy's revenue from operations remained steady at Rs 1,082.29 crore in H1FY25, compared to Rs 1,008.32 crore reported in H1FY24. On the flip side, total expenses grew 19.54 per cent  to Rs 885 crore in H1FY25 from Rs 740.33 crore during the same period in the previous fiscal year.