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The initial public offering (IPO) of NTPC Green Energy Ltd., NTPC Ltd.'s green energy arm, is opening for subscription today,(November 19. The company is planning to raise ₹10,000 crore through the IPO.
Ahead of the IPO opening, the grey market premium (GMP) for NTPC Green Energy shares is around ₹0.70, indicating a premium of 0.65% over the issue price.
The price band for the IPO has been fixed between ₹102 and ₹108 per share, with the IPO scheduled to close on November 22. Investors can bid for a minimum of 138 shares in one lot and in multiples thereof.
SBI Securities: Subscribe
“At the upper price band of ₹108, NGEL is valued at FY24 enterprise value-EBITDA of 53.4 times on post issue capital,” it said while recommending investors to subscribe to the issue at cut-off price for a long term.
The brokerage said the company will increase its operational capacity to 6 GW, 11 GW, and 19 GW by FY25, FY26, and FY27, respectively from 3.3 GW as of September 2024.
“Basis our back of the envelope calculation, at upper price band, the issue is priced at FY25E/FY26E/FY27E EV/EBITDA multiple of 35.3x/18.3x/10.1x and EV/MW of ₹16.8 crore/9.0 crore/5.1 crore respectively,” it said.
The company has exponential growth potential in medium term with its revenue, EBITDA, and profit expected to grow at a CAGR of 79.0%, 117.2%, and 123.8%, respectively, to ₹11,250 crore, ₹9,563 crore, and ₹1,980 crore, respectively over FY24-27 period.
Reliance Securities: Subscribe for long term
Reliance Securities, in its note, wrote that NTPC Green Energy benefits from NTPC’s financial strength and long-term relationships with off takers and suppliers, growing its revenues along with strong credit ratings that enable a low cost of debt executing large scale projects.
The brokerage also said that NTPC Green Energy has deep domain expertise of the management team focusing on new energy solutions like green hydrogen, green chemicals and storage with prudent growth and contributing towards fulfilling India’s net zero goals.
"We believe with a prudent business model and strong earnings growth with improved financials and return ratios, we recommend a Subscribe to the issue for the long term," it said.
Arihant Capital: Subscribe
The brokerage has recommended a 'Subscribe for long term' rating for aggressive investors on this issue. It added that the company will continue to leverage NTPC group’s economies of scale for projects will lead to business opportunities with better terms and new technologies will lead to cost reductions going forward.
Swastika Investmart: Subscribe for long term
Shivani Nyati, Head of Wealth at Swastika Investmart has recommended the IPO for long-term investors only, considering the aggressive pricing based on PE ratio.
Nyati has given a subscribe rating to the IPO due to NTPC Green Energy's robust, diversified portfolio across geographies and offtakers. She also said that company has reported consistent top-line growth, but temporary profitability and margin fluctuations.
SAMCO Securities: Avoid
As a subsidiary of NTPC operating in a high-growth segment, the company demonstrates significant future potential, leveraging NTPC's extensive experience in the sector. A peer comparison of key fundamentals presents a favorable image, with the company outperforming its peers in revenue growth, profit margins, and leverage ratios.
However, the brokerage said that its capacity utilisation factor, a critical measure of a plant's electricity generation efficiency, is relatively lower for its solar and wind projects compared to competitors.
Additionally, an analysis of the company's price-to-earnings ratio against its peers indicates overvaluation, raising concerns about its long-term wealth creation prospects. Consequently, it has advised investors to avoid the IPO.
The IPO with a face value of ₹10 per equity share will consist entirely of fresh equity shares, with no Offer For Sale (OFS) component.
As much as 75% of the issue has been reserved for institutional investors, 15% for non-institutional investors, and 10% for retail investors. Eligible employees can bid for shares with a ₹5 per share discount, with ₹200 crore worth of shares allocated under the employee quota.
Additionally, shares worth ₹1,000 crore will be set aside for existing NTPC shareholders under the shareholder reservation.
Proceeds from the fresh issue to the extent of ₹7,500 crore will be used for investment in its wholly owned subsidiary, NTPC Renewable Energy Ltd. (NREL) for repayment, in full or in part of certain outstanding borrowings availed by NREL; and general corporate purposes.
This IPO ranks as the third largest of 2024, following Hyundai Motor India's ₹27,870 crore issue and Swiggy's ₹11,300 crore offering.
NTPC management is aiming for significant value unlocking through the listing of NTPC Green Energy, sources told CNBC-TV18 earlier.
In an interview with CNBC-TV18, Mohit Bhargava, CEO of NTPC Green Energy, had said that the primary reason for considering an IPO is the significant need for equity in the business.
"We will have to raise equity either through internal accruals or from the markets. So we feel that we will have to go to the market at some point of time."
NTPC Green Energy, a wholly owned subsidiary of NTPC is the largest renewable energy public sector enterprise (excluding hydro energy) in term of operating capacity as of September 24 and power generation as of March 2024. The company’s renewable energy portfolio includes both solar and wind power assets with presence across multiple locations in more than 6 states which helps in mitigating risk of location specific generation variability.
As of Sep’24, NTPC Green’s operational capacity stood at 3,220 MW of solar projects and 100 MW of wind projects across 6 states with average Power Purchasing Agreement (PPA) period of 25 years.
Further, it has 13,576 MW of contracted & awarded projects and capacity under pipeline of 9,175 MW as of Sep’24.
NTPC aims to achieve 60 gigawatts (GW) of renewable energy (RE) capacity by FY32. It currently has 3.5 GW of installed capacity and more than 28 GW under development.
IDBI Capital Markets & Securities, HDFC Bank, IIFL Securities, and Nuvama Wealth Management will act as the book-running lead managers for the issue.
Ahead of the IPO opening, the grey market premium (GMP) for NTPC Green Energy shares is around ₹0.70, indicating a premium of 0.65% over the issue price.
The price band for the IPO has been fixed between ₹102 and ₹108 per share, with the IPO scheduled to close on November 22. Investors can bid for a minimum of 138 shares in one lot and in multiples thereof.
NTPC IPO review
SBI Securities: Subscribe
“At the upper price band of ₹108, NGEL is valued at FY24 enterprise value-EBITDA of 53.4 times on post issue capital,” it said while recommending investors to subscribe to the issue at cut-off price for a long term.
The brokerage said the company will increase its operational capacity to 6 GW, 11 GW, and 19 GW by FY25, FY26, and FY27, respectively from 3.3 GW as of September 2024.
“Basis our back of the envelope calculation, at upper price band, the issue is priced at FY25E/FY26E/FY27E EV/EBITDA multiple of 35.3x/18.3x/10.1x and EV/MW of ₹16.8 crore/9.0 crore/5.1 crore respectively,” it said.
The company has exponential growth potential in medium term with its revenue, EBITDA, and profit expected to grow at a CAGR of 79.0%, 117.2%, and 123.8%, respectively, to ₹11,250 crore, ₹9,563 crore, and ₹1,980 crore, respectively over FY24-27 period.
Reliance Securities: Subscribe for long term
Reliance Securities, in its note, wrote that NTPC Green Energy benefits from NTPC’s financial strength and long-term relationships with off takers and suppliers, growing its revenues along with strong credit ratings that enable a low cost of debt executing large scale projects.
The brokerage also said that NTPC Green Energy has deep domain expertise of the management team focusing on new energy solutions like green hydrogen, green chemicals and storage with prudent growth and contributing towards fulfilling India’s net zero goals.
"We believe with a prudent business model and strong earnings growth with improved financials and return ratios, we recommend a Subscribe to the issue for the long term," it said.
Arihant Capital: Subscribe
The brokerage has recommended a 'Subscribe for long term' rating for aggressive investors on this issue. It added that the company will continue to leverage NTPC group’s economies of scale for projects will lead to business opportunities with better terms and new technologies will lead to cost reductions going forward.
Swastika Investmart: Subscribe for long term
Shivani Nyati, Head of Wealth at Swastika Investmart has recommended the IPO for long-term investors only, considering the aggressive pricing based on PE ratio.
Nyati has given a subscribe rating to the IPO due to NTPC Green Energy's robust, diversified portfolio across geographies and offtakers. She also said that company has reported consistent top-line growth, but temporary profitability and margin fluctuations.
SAMCO Securities: Avoid
As a subsidiary of NTPC operating in a high-growth segment, the company demonstrates significant future potential, leveraging NTPC's extensive experience in the sector. A peer comparison of key fundamentals presents a favorable image, with the company outperforming its peers in revenue growth, profit margins, and leverage ratios.
However, the brokerage said that its capacity utilisation factor, a critical measure of a plant's electricity generation efficiency, is relatively lower for its solar and wind projects compared to competitors.
Additionally, an analysis of the company's price-to-earnings ratio against its peers indicates overvaluation, raising concerns about its long-term wealth creation prospects. Consequently, it has advised investors to avoid the IPO.
NTPC IPO details
The IPO with a face value of ₹10 per equity share will consist entirely of fresh equity shares, with no Offer For Sale (OFS) component.
As much as 75% of the issue has been reserved for institutional investors, 15% for non-institutional investors, and 10% for retail investors. Eligible employees can bid for shares with a ₹5 per share discount, with ₹200 crore worth of shares allocated under the employee quota.
Additionally, shares worth ₹1,000 crore will be set aside for existing NTPC shareholders under the shareholder reservation.
Proceeds from the fresh issue to the extent of ₹7,500 crore will be used for investment in its wholly owned subsidiary, NTPC Renewable Energy Ltd. (NREL) for repayment, in full or in part of certain outstanding borrowings availed by NREL; and general corporate purposes.
This IPO ranks as the third largest of 2024, following Hyundai Motor India's ₹27,870 crore issue and Swiggy's ₹11,300 crore offering.
NTPC management is aiming for significant value unlocking through the listing of NTPC Green Energy, sources told CNBC-TV18 earlier.
In an interview with CNBC-TV18, Mohit Bhargava, CEO of NTPC Green Energy, had said that the primary reason for considering an IPO is the significant need for equity in the business.
"We will have to raise equity either through internal accruals or from the markets. So we feel that we will have to go to the market at some point of time."
Company overview
NTPC Green Energy, a wholly owned subsidiary of NTPC is the largest renewable energy public sector enterprise (excluding hydro energy) in term of operating capacity as of September 24 and power generation as of March 2024. The company’s renewable energy portfolio includes both solar and wind power assets with presence across multiple locations in more than 6 states which helps in mitigating risk of location specific generation variability.
As of Sep’24, NTPC Green’s operational capacity stood at 3,220 MW of solar projects and 100 MW of wind projects across 6 states with average Power Purchasing Agreement (PPA) period of 25 years.
Further, it has 13,576 MW of contracted & awarded projects and capacity under pipeline of 9,175 MW as of Sep’24.
NTPC aims to achieve 60 gigawatts (GW) of renewable energy (RE) capacity by FY32. It currently has 3.5 GW of installed capacity and more than 28 GW under development.
IDBI Capital Markets & Securities, HDFC Bank, IIFL Securities, and Nuvama Wealth Management will act as the book-running lead managers for the issue.
Note To Readers
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First Published: Nov 18, 2024 6:24 AM IST
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