NTPC Green Energy IPO: All You Need to Know
The stage is set for one of the most eagerly awaited and one of the biggest IPOs in India’s renewable energy sector! Yes, you guessed it right! The green energy arm of NTPC - NTPC Green Energy Limited, is set to raise a whopping Rs 10,000 crore through its upcoming public offering which is going live for subscription from 19th November 2024.
In this post, we will breakdown every detail of this IPO including company’s competitive strengths, financial performance, industry overview, peer comparison and will also weigh on the possible risk factors. Let’s dive into what makes the IPO of NTPC Green Energy Limited a game-changer and why it could be a major opportunity for investors!
About the NTPC Green Energy Limited:
Incorporated in April 2022, NTPC Green Energy Limited is a wholly owned subsidiary of Limited, one of India’s Maharatna public sector enterprises. It is the largest renewable energy public sector enterprise (excluding hydro) in terms of operating capacity as of September 30, 2024 and power generation in Fiscal 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. The company is strategically focused on developing a portfolio of utility-scale renewable energy projects, as well as projects for public sector undertakings (PSUs) and Indian corporates.
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.
IPO Details:
The IPO will be open for subscription from 19th November 2024 to 22nd November 2024. The price band set for the IPO is Rs 102 to Rs 108 per share, and eligible employees of the company can enjoy employee discount of Rs 5 per share. With 1 lot size of 138 shares, retail investors can invest in the IPO with minimum Rs 14,904.
Out of the set IPO size, 75% (61,11,11,111 shares worth Rs 6,600 crores) will be allocated to Qualified Institutional Buyers, 15% (12,22,22,222 shares worth Rs 1,320 crores) will be allocated to Non Institutional Investors, and 10% (8,14,81,481 shares worth Rs 880 crores) will be reserved for retail investors. Rs 1,000 crore worth shares i.e. 9,25,92,593 shares will be reserved for eligible shareholders of NTPC Limited (as on 12th November 2024); while Rs 200 crore worth shares i.e. 1,94,17,476 shares will be reserved for eligible employees of NTPC Green Energy Limited.
IDBI Capital Markets & Securities, HDFC Bank, IIFL Capital Services and Nuvama Wealth Management are the book running lead managers; whereas, KFin Technologies will serve as a Registrar to this IPO.
How the raised funds will be utilized?
The whole offer of Rs 10,000 crores is a Fresh Issue and hence all the proceeds raised through the IPO will be received by the company; which will be utilized as follows:
(i) NTPC Green Energy Limited will utilise Rs 7,500 crores out of the raised capital for repayment/ prepayment of borrowings availed by its subisidary - NTPC Renewable Energy Limited.
(ii) The rest Rs 2,500 crores will be used for general corporate purposes.
Let’s talk about the numbers…
NTPC Green Energy has demonstrated remarkable financial growth, with revenue rising from Rs 910 crores in FY22 to Rs 1,963 crores in FY24, reflecting a robust CAGR of 46.82%. EBITDA has gone up at a CAGR of 48.23% from Rs 794.89 crores in FY22 to Rs 1,746.47 crores in FY24. Profitability has also surged significantly, as PAT grew at an impressive CAGR of 90.8% during the same period.
The average capacity utilization factor (CUF) for its solar assets improved from 19.2% to 23.9% between FY22 and FY24, driven by a 3x increase in power generation. As of September 2024, the company commands a 17% share of installed capacity and a 24% share of power generation. With a portfolio and pipeline exceeding 26 GW in solar and wind projects, supported by PPAs averaging 25 years, the company envisions scaling its renewable energy capacity to 60 GW by 2032. This trajectory highlights consistent revenue growth, enhanced profitability, and economies of scale.
Industry Overview:
India's energy demand stood at 1,627 BU in FY24, and is projected to grow at a CAGR of 5.5% to reach 2,170 BU by FY29, driven by infrastructure expansion, robust economic growth, and power sector reforms. Renewable energy capacity has risen from 63 GW in Mar'12 to 201 GW in Sep'24, constituting 44% of total installed capacity but only 23% of energy generated due to lower utilization. By FY29, total installed capacity is expected to reach 667 GW, with renewable energy accounting for ~50%, driven by favorable policies, competitive tariffs, and green energy initiatives. Solar energy is set to add ~174 GW and wind energy ~40 GW between FY25-FY29, supported by technological advancements, government incentives, and sustainability targets.
Comparison with Listed Industry Peers:
The company’s lsited industry peers include Adani Green Energy Limited and one international peer - ReNew Energy Global PLC.
Recently listed ACME Solar Holdings Limited is also one of the competitors to the company.
What makes NTPC Green Energy Limited an investable company?
Strong Parentage by NTPC Limited, which has extensive experience in executing large- scale projects, long term relationships with off takers and suppliers and financial strength.
Portfolio of 16,896 MWs solar and wind projects as of September 30, 2024 with diversification across geographies and off takers.
Experienced team in renewable energy project execution and procurement as well as operating and maintenance.
Growing revenues along with strong credit ratings that enable a low cost of capital employed.
What pose risks to the company’s business?
Off-taker risk: Electricity transmission and distribution, controlled by government utilities, creates a concentrated pool of power purchasers; losing these customers or their financial instability could harm the business.
Delayed payments from discoms could hurt financials in short term.
Significant competition from traditional and renewable energy companies.
Final Words…
In a nutshell, NTPC Green Energy Limited is backed by NTPC Limited and boasts a strong renewable portfolio, with experienced team and steady revenue growth with low capital costs. While challenges like reliance on government utilities and competition exist, its solid foundation and promising growth outlook make it a compelling long-term investment.
Investing in this IPO might be appealing, but remember, every investment requires careful consideration. Do your research, seek expert advice, and ensure it aligns with your risk appetite.
Disclaimer:
This article is for informational purposes only and does not constitute financial advice, investment recommendations, or an endorsement of NTPC Green Energy Limited or its IPO. Investing in IPOs involves market risks, and past performance does not guarantee future returns. Readers are advised to conduct their own research, assess their financial situation, and consult with a qualified financial advisor before making any investment decisions. The author and website are not responsible for any losses arising from investments made based on this information.
