NTPC Green Energy’s ₹10,000 Crore IPO Details Out: Is It the Right Time to Invest?
Nov 18, 2024
NTPC Green Energy Limited (NGEL), a company wholly owned by NTPC Limited, is getting ready for its IPO strategic move to raise ₹10,000 crore. It will be just another IPO in the Energy sector like Waaree Energies and ACME solar holdings This NTPC upcoming IPO is ready to begin on November 19, 2024, and will close on November 22, 2024.
The renewable green energy sector in India is on its transformative shift as it is developing drastically and NTPC Green Energy Limited is leading at the forefront of this change. As a wholly-owned subsidiary of NTPC Limited, the most critical power generation and biggest power technology agency in India, NTPC Green Energy Limited has been instrumental in driving the green renewable energy agenda. NTPC Green Energy Limited is about to scale new heights through the transformative move. This article explores the information of this great IPO and evaluates whether now could be the right time and moment for investors to capitalize on this opportunity.
Overview of NTPC Green Energy
NTPC Green Energy Limited specializes and focuses mainly on large-scale renewable energy projects, including solar, wind, and green hydrogen. The company has established targets to increase its renewable power capacity and expand beyond, aiming for a current capacity of 24 GW to 60 GW by 2032. These strategically driven major goals align with India's ambitions of adding 500 GW of renewable power by 2030 and achieving net zero emissions by 2070.
Business Focus and Expansion Plans
As a leading public sector renewable energy corporation, NTPC Green Energy has been specializing in solar and wind energy initiatives. With a current operational capacity of 3,071 MW in solar projects and initiatives and an additional 100 MW in wind projects, the organization has been rapidly increasing its footprint across multiple states in India. As of June 30, 2024, its renewable energy portfolio constituted 14,696 MWs of projects, encompassing operational, under-construction, and contracted assets and shriveled belongings. This task base offers NTPC Green Energy with a huge reach, permitting it to mitigate vicinity-based generation risks and hold steady operations throughout various regions.
The enterprise plans to utilize ₹7,500 crore of IPO proceeds to pay off debt associated with NTPC Renewable Energy Limited (NREL), reducing certain financial leverage and strengthening its balance sheet. The remaining funds will be directed in the direction of general corporate purposes and increasing NTPC Green Energy’s mission and project portfolio, supporting its commitment to achieving 60 GW of renewable energy capacity through FY2032.
NTPC Green Energy Limited IPO Details
Key Information | IPO Details |
IPO Start Date | November 19, 2024 |
IPO End Date | November 22, 2024 |
IPO Listing Date | November 27, 2024 |
Total Issue Size | ₹10,000 crore |
Price Band | ₹102 - ₹108 per share |
Lot Size | 138 shares |
Strategic Goals for IPO Proceeds
The enterprise plans to allocate 75% of the proceeds (₹7,500 crore) in the direction of debt compensation, especially for NTPC Renewable Energy Ltd., its subsidiary. NTPC Renewable Energy Ltd. debt burden includes term loans and operating capital facilities, totaling ₹16,235 crore as of July 31, 2024. Debt reimbursement is predicted to lower interest expenses, enhance and improve financial ratios, and free up capital for similar further expansion. The remaining funds will assist in general corporate purposes, focusing on expanding NTPC Green Energy’s renewable energy potential and operational reach.
NTPC Green Energy Limited Financial Performance
NTPC Green Energy has showcased incredible financial growth in recent years. For FY24, it suggested sales revenue of ₹1,962 crore, up from ₹910 crore in FY22, marking a compound growth rate(CAGR) of about 46.82%. Net profit additionally saw a tremendous increase, growing from ₹94.74 crore in FY22 to ₹345 crore in FY24, reaching a CAGR of 90.75%. These metrics mirror NTPC Green Energy’s fast growth and robust financial basis in the renewable energy sector.
The company’s operating EBITDA margin stands at an outstanding 88.99%, which underscores its ability to preserve profitability while expanding operations. Additionally, for Q1 FY25, NTPC Green Energy posted revenue of ₹578.44 crore and net earnings of ₹138.61 crore, demonstrating its ongoing momentum as it prepares for the IPO.
Key Investment Considerations
Debt Reduction for Financial Stability
Debt repayment is a primary focus of the IPO proceeds. The payment towards ₹7,500 crore of NREL’s debt, NTPC Green Energy aims to reduce its interest burden and improve liquidity. This move is expected to enhance the company’s financial stability and watch out for NTPC GMP, though it is not very high but it seems worthwhile in terms of other metrics and good as per a long-term perspective, making it a more attractive investment in the long term.
2. Government Support and Public Sector Status
As a public sector enterprise, NTPC Green Energy benefits from government support in terms of policies, incentives, and growth opportunities. Along with India’s renewable energy policies focused on reducing fossil fuel dependency, NTPC Green Energy is positioned well to benefit from ongoing government backing, offering investors a relatively safe entry into the green energy sector.
3. Valuation and Price Band
The IPO price band of ₹102-108 per share presents a reasonable valuation, especially given the company’s strong market position and financial performance. However, recent market conditions have brought about a fluctuating grey market premium (GMP), currently hovering and soaring around ₹9-10 per share. This volatility suggests that while long-term growth prospects are strong, investors should remain mindful and ought to continue to be conscious of short-term market trends.
Strategic Role in India’s Renewable Energy Targets
NTPC Green Energy’s role as a leader in renewable energy aligns with India’s ambitious and formidable clean energy targets. With a 60 GW renewable capacity target by FY2032, NTPC Green Energy’s expanding portfolio of solar and wind projects offers a clear path to meeting this goal. Investors looking to support, guide and benefit from India’s green energy transition may find this IPO a strategic investment for the long term.
Should You Invest? A Balanced Perspective
The NTPC Green Energy IPO provides a unique opportunity to invest in a public sector renewable energy company having a solid track record, government support, and a clear growth and expansion plan. The objective on debt reduction, coupled with the government’s commitment to renewable energy, positions NTPC Green Energy for sustainable growth and is a well-defined strategy for expansion. Additionally, its existing and expanding renewable energy portfolio gives it a strong market presence, making a promising investment that enables consistent and stable returns to investors.
Investors who are looking to invest long-term horizon, the IPO’s valuation and strategic focus make it a potentially rewarding investment in the green energy sector. However, current market conditions and recent GMP fluctuations suggest that cautious investors should consider both short-term volatility and long-term potential before investing and bearing in mind all parameters related to investment and reviewing the DRHP.
Conclusion
The NTPC Green Energy IPO is a pivotal occasion for India’s renewable energy landscape, presenting investors an instantaneous stake within the nation’s green transition. Along with a robust pipeline, powerful debt management plans, and government aid, NTPC Green Energy is well positioned to capitalize on the developing demand for clean energy. Investors interested in sustainable, government-sponsored investments, this IPO ought to offer both financial returns and the opportunity to make contributions to a greener future.