NTPC Green Energy IPO: Everything You Need to Know

The eagerly awaited NTPC Green Energy IPO is set to open for public subscription from November 19 to November 22, 2024. As a subsidiary of NTPC Ltd, India's largest power producer, NTPC Green Energy focuses exclusively on renewable energy and aims to play a pivotal role in India's transition to sustainable energy solutions. The IPO, worth ₹10,000 crore, has garnered significant attention, with 10% of the issue reserved for NTPC shareholders.

This article explores the IPO's key details, eligibility criteria, financial performance, market sentiment, and whether you should invest in it.

Eligibility for Shareholder Quota

To incentivize parent company shareholders, ₹1,000 crore of the IPO is reserved for NTPC Ltd shareholders, ensuring higher chances of allotment. According to the Red Herring Prospectus (RHP):

Investors holding at least one NTPC share in their demat account as of November 13, 2024, qualify for the shareholder quota.

The allotment will follow a proportionate basis, ensuring fair distribution.

However, if you haven’t purchased NTPC shares by the cutoff date (November 13), you are no longer eligible for this reserved quota.

Can You Buy NTPC Shares Now to Qualify?

Unfortunately, no. The cutoff date has passed. If you purchase NTPC shares now, you cannot avail yourself of the shareholder quota.

However, an expert suggests a workaround:

“If you know someone who holds NTPC shares, you can ask them to apply for the IPO on your behalf. That’s the only option for those without NTPC shares.”

Key IPO Details

Here are the critical highlights of the NTPC Green Energy IPO:

Price Band: ₹102–₹108 per share

Employee Discount: ₹5 per share for eligible employees under the reserved quota

Issue Structure: Entirely a fresh issue of shares; no offer-for-sale component

Opening Date: November 19, 2024

Closing Date: November 22, 2024

Total Size: ₹10,000 crore

Reserved Quota:

10% for NTPC shareholders

Employee quota with a discount

Utilization of Funds

The ₹10,000 crore raised through this IPO will primarily fund NTPC Green Energy’s operations and expansion:

₹7,500 crore will be allocated to its wholly owned subsidiary, NTPC Renewable Energy Ltd (NREL), for:

Loan repayment or prepayment

Supporting future projects

The remaining funds will be used for general corporate purposes.

Why Is the Market Buzzing About This IPO?

The IPO arrives at a time when green energy has become a top priority for global investors, especially in India, where the renewable energy sector is growing rapidly.

Recent Success of Green Energy IPOs

The bumper listings of Premiere Energies and Waaree Energies have spurred enthusiasm among investors for green energy IPOs. Despite recent corrections in these stocks, investors view NTPC Green Energy as a stable, state-backed player with robust growth prospects.

Government Backing and Strategic Importance

Being a subsidiary of NTPC Ltd, India’s leading power producer, adds credibility. Moreover, NTPC Green Energy’s operational scale and ambitious expansion plans align with India's national renewable energy targets, making it a strategic player in this sector.

NTPC Green Energy’s Portfolio and Growth Potential

Current Portfolio

Operational Capacity:

Solar Power: 3,220 MW

Wind Power: 100 MW

Total Portfolio (September 2024): 16,896 MW, including:

3,320 MW of operational projects

13,576 MW of contracted and awarded projects

Future Pipeline

The company has an additional 11 GW of projects in the pipeline, bringing its total planned capacity to 26,071 MW.

Focus Areas

NTPC Green Energy is diversifying its portfolio by:

Developing utility-scale renewable projects.

Partnering with corporates and PSUs for captive renewable energy solutions, which are expected to offer higher returns than traditional projects.

Financial Highlights

NTPC Green Energy has shown exceptional financial growth:

Revenue Growth:

FY22: ₹910.42 crore

FY24: ₹1,962.60 crore

CAGR: 46.82%

Operating EBITDA:

FY22: ₹794.89 crore

FY24: ₹1,746.47 crore

CAGR: 48.23%

Profit After Tax (PAT):

FY22: ₹94.74 crore

FY24: ₹344.72 crore

CAGR: 90.75%

This impressive performance underscores NTPC Green Energy’s ability to generate consistent returns, driven by efficient operations and strategic project management.

What Is the Grey Market Premium (GMP) Saying?

The Grey Market Premium (GMP), which reflects market sentiment, has been volatile:

November 9: ₹25 (23.14% premium)

November 15: ₹2 (1.85% premium)

The drop in GMP suggests a cautious approach among investors, influenced by overall market trends and the performance of recent green energy IPOs.

Analysts’ Recommendations: Should You Invest?

Experts remain optimistic about the IPO’s long-term potential, citing its focus on renewable energy and NTPC's strategic diversification.

ICICI Securities highlights NTPC Green Energy’s dual focus on utility-scale projects and captive solutions, which can yield higher returns.

WealthMills Securities emphasizes the IPO’s timing, aligning with India’s push towards renewable energy.

NTPC’s target of 60 GW of renewable capacity by FY32 underscores its commitment to sustainability, offering robust growth potential.

Conclusion: Is NTPC Green Energy IPO Worth It?

The NTPC Green Energy IPO represents an opportunity to invest in a state-backed leader in India’s renewable energy sector. With strong financials, strategic initiatives, and government backing, it has the potential to deliver value to long-term investors.

However, the falling GMP and recent volatility in green energy stocks suggest short-term caution. Investors are advised to evaluate their risk tolerance and consult with financial advisors before investing.