NTPC Green Energy IPO: Analysts Remain Bullish; Check Recommendations, Risks, Opening Date

The NTPC Green Energy IPO, which is likely to be opened in the first week of November 2024 to raise Rs 10,000 crore, is being keenly watched by investors even as analysts remain bullish. According to the latest report by global brokerage firm Jefferies, assuming a 10-15 per cent stake dilution and its parent NTPC’s RE is at a 2x premium to its coal business, the shares of NTPC could potentially add 5-11 per cent upside on the current market price. Earlier, ICICI Securities also gaven a ‘buy’ rating to the shares of state-run power giant NTPC.

NTPC has announced the commissioning of a 50 MW capacity out of 220 MW Shajapur Solar Project in Madhya Pradesh. The company has also commissioned 98.78 MW out of 300 MW Shambu ki Burj-2 Solar PV Project at Bikaner in Rajasthan. The Shajapur Solar Project is of NTPC Renewable Energy Limited (NTPC REL), a step-down subsidiary of NTPC.

The Shambu ki Burj-2 Solar PV Project is of NTPC Green Energy Limited, a wholly-owned subsidiary of NTPC.

IPO-bound NTPC Green Energy Ltd (NGEL) recently also entered into a JV agreement with Mahatma Phule Renewable Energy and Infrastructure Technology for green projects. The NTPC Green Energy IPO, which is expected to raise Rs 10,000 crore, is likely to be opened in the first week of November. The price band and official dates of the IPO are yet to be announced. Here’s everything you need to know about the NTPC Green Energy IPO.

NTPC Green Energy IPO: What Analysts’ Say

Giving a ‘Buy’ rating to the upcoming IPO, Jefferies in its note said, “There are few pure-play listed renewable energy (RE) generation companies in India. NTPC Green (NGEL) has 3.2 GW operational now, including 3.1 GW solar and 100 MW wind. The company plans to ramp up 19x to 60 GW by 2032, implying a 44% capacity CAGR. A DRHP has been filed for a fresh issue up to Rs100 bn. Assuming a 10-15% stake dilution and NTPC’s RE is at a 2x premium to its coal business, it could potentially add 5-11 per cent upside on the current market price.”

NTPC standalone and its THDC subsidiary’s RE capacity is 693 MW, which will not be transferred to NGEL. 15 GW of this is NGEL (per DRHP) and this ties into the 16 GW FY26E-27E consolidated RE capacity. Typically, RE with strong growth has traded at a material premium to coal-based plants. For example, JSW Energy (65% RE capacity) is trading at 6.4x PB FY24 vs NTPC’s 2.5x. “Hence, we have considered a 2x premium in multiple to gauge the upside for NTPC. Our PT of Rs485 values NTPC at 2.5x consolidated PB Sept. 26E, a 9% premium to past upcycle average of 2.3x to reflect better visibility on capacity addition accelerating.”

It said that the risks include 1) higher under-recovery; and 2) meaningful delay in RE execution.

Earlier, ICICI Securities gave a ‘buy’ rating to the shares of NTPC. It said NTPC Green Energy Limited (NGEL), a 100 per cent subsidiary of NTPC, is looking to debut on exchanges as the company files its DRHP.

“We analyse NGEL’s business, look at its valuation metrics and evaluate key concerns. The company has an operational capacity of 3.2GW, 12GW of contracted under-construction renewable energy (RE) projects and future development pipeline at 11GW. NGEL is not only looking to set up utility-scale RE projects, but also tie up with corporates and PSUs for their captive RE requirements. We expect the return ratios for captive to be higher than utility-scale projects,” ICICI Securities said in a note.

NTPC targets 60 gigawatts (GW) of renewable energy (RE) capacity by FY32.

“We estimate revenue of Rs 117 billion (Rs 11,700 crore), EBITDA of Rs 95-100 billion (Rs 9,500-10,000 crore) for its portfolio. EV to EBITDA remains the best valuation metric to analyse NGEL’s RE portfolio. Retain BUY and TP of Rs 495 on NTPC,” ICICI Securities stated.

NTPC Green Energy IPO: Opening Date

According to media reports, the NTPC Green Energy IPO to raise Rs 10,000 crore is likely to be opened in the first week of November. The company has planned roadshows in India (Mumbai) as well as abroad, especially in Singapore.

The NTPC Green Energy IPO will also have a shareholders quota. So, those who have shares of NTPC as of the date of RHP, which will be filed later, can participate in the shareholders category in the IPO.

NTPC Green Energy IPO Draft Papers

NTPC Green Energy, the renewable energy arm of NTPC, has filed draft papers with capital markets regulator Sebi to raise Rs 10,000 crore through an initial public offering (IPO). The IPO is entirely a fresh issuance of equity shares with no offer-for-sale (OFS) component, according to the draft red herring prospectus (DRHP).

The renewable energy firm said proceeds of the issue to the tune of Rs 7,500 crore will be used to repay or prepay part or all of its subsidiary NTPC Renewable Energy Ltd’s (NREL) outstanding loans, while a portion will be utilised for general corporate purposes.

The filing comes at a time when the country’s IPO market is thriving, with around 60 main board companies having launched their initial share-sales this year so far.

NTPC Green Energy IPO: What Should Investors Do To Raise IPO Allotment Chance

As the NTPC Green Energy IPO will also have a shareholders quota, investors can buy one NTPC shares now to be eligible for the shareholders category. It will raise their chances of IPO allotment. Those who have shares of NTPC as of the date of RHP, which will be filed later, can participate in the shareholders category in the IPO.

NTPC Green Energy: A ‘Maharatna’ PSU

NTPC Green Energy is a ‘Maharatna’ central public sector enterprise with renewable energy portfolio, including solar and wind power assets spread across more than six states.

As of August 2024, the company’s operational capacity comprised 3,071 MW from solar projects and 100 MW from wind projects, across six states.

Overall, the NTPC group aims to reach 60 GW of renewable energy capacity by 2032. Currently, it has 3.5 GW of installed capacity and over 28 GW in progress.

India’s Renewable Energy Situation

India’s renewable energy sector is growing rapidly. Globally, India is ranked fourth in renewable energy capacity, including wind and solar installations, the draft papers said, citing a Crisil report.

The country’s installed renewable energy capacity increased from 63 GW in FY12 to 123 GW in FY21, reaching about 191 GW by March 2024 (including large hydro). As of March 2024, renewable energy made up nearly 43 per cent of India’s total power generation capacity, with solar energy leading this growth, it added.

IDBI Capital Markets & Securities, HDFC Bank, IIFL Securities, and Nuvama Wealth Management are the book-running lead managers to the issue.

NTPC Green Energy IPO: Expertspeak

“The IPO comes at a time when thermal power-heavy NTPC is looking for other energy avenues to diversify into and bolster revenues,” Kranthi Bathini, director of equity strategy at WealthMills Securities said, according to Reuters.

“Considering the fact that green energy will remain in focus in the near future, investors would definitely want a slice of this pie,” Bathini added.