​Should you dump Adani Green stock for NTPC Green IPO? What analysts say

Adani group stocks came under selling pressure on Thursday after Gautam Adani was indicted in New York over his role in an alleged multibillion-dollar bribery and fraud scheme.  Vneet Jaain, former chief executive officer at Adani Green Energy along with Adanis, prosecutors said, raised over $3 billion in loans and bonds by hiding their corruption from lenders and investors.    Following the development, all Adani Group stocks tumbled in trade on Thursday, with Adani Green slipping 20 per cent to hit a low of Rs 1136 levels in intra-day trades.  The development, analysts believe, has triggered a knee-jerk reaction in most Adani group stocks, including Adani Green, which is likely to bounce back once more clarity emerges on this issue. Investors, they suggest, should remain on the sidelines as regards Adani group stocks for now, and evaluate the investment case in each stock based on its long-term fundamentals.    “The stocks have seen a knee-jerk reaction on Thursday following the development. Things should stabilize over the next few weeks. Till then, investors should stay on the sidelines. Investment in the ongoing NTPC Green initial public offer (IPO) should be done based on its merits and not because another company operating in the same / similar sector (Adani Green in this case) is under a cloud,” said Ambareesh Baliga, an independent market analyst.  NTPC Green Energy (NGEL) is a wholly-owned subsidiary of NTPC and an umbrella company for the green business initiatives of its Maharatna parent. NGEL's portfolio comprises 16,896 MW, including 3,320 MW of operational projects and 13,576 MW of contracted and awarded projects. Additionally, it has 9,175 MW capacity in the pipeline, bringing the total capacity to 26,071 MW.    Adani Green Energy Limited (AGEL), on the other hand, is one of the largest renewable companies in India, with a current project portfolio of 20,434 MW. The Gautam Adani-owned company boasts of an asset base of $2 billion with 100 per cent power purchase agreements (PPAs).  A K Prabhakar, an independent market analyst, suggests investors stay away from Adani group stocks for now till there is more clarity. On Adani Green versus NTPC Green IPO, he suggests investors look at the valuation at which the shares are being offered in the IPO and make their investment call accordingly.  In terms of valuation, at the upper price band of Rs 108 per share, NTPC Green is seeking market capitalisation (market-cap) of Rs 91,000 crore. Based on FY25 annualised earnings and fully diluted post-IPO paid-up capital, NTPC Green is demanding a PB of 4.96x and a PE of 259.56x.     “I think NTPC Green is being offered at a very steep valuation (price-to-earnings). For a power stock / company, the PE should be much reasonable at around 20 – 25x. NTPC Green’s valuation is too steep for comfort. That said, Adani group stocks are likely to remain under pressure for some time till clarity emerges. Swapping NTPC Green for Adani Green, or vice-versa, just because Adani group stocks are under pressure does not make a good investment thesis,” he said.