NTPC Green Energy IPO Analysis 2024: Should You Subscribe?

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NTPC Green Energy Ltd (NGEL) launched its initial public offering (IPO) on November 19, 2024, with bidding set to close on November 22. The IPO, which is trading flat in the grey market, received a solid retail response on the first day.

However, investors should get a clear understanding of both potential rewards and risks before subscribing. This IPO analysis provides a comprehensive review to help make an informed decision.

NTPC Green Energy IPO Details

  • Issue Details: Mainstream
  • Issue Size: Rs 10,000 crore
  • Fresh Issue: Rs 10,000 crore
  • Price Band: Rs 102 – Rs 108
  • Lot size: 138 shares
  • Listing Date: November 27, 2024

NTPC Green Energy IPO Subscription Status

As of 5 p.m. on the opening day, the IPO of NTPC Green Energy Ltd saw an overall subscription rate of 0.35 times. Retail investors led with a subscription of 1.42 times their allotted shares, followed by non-institutional investors at 0.16 times. Qualified institutional buyers (QIBs) were yet to subscribe to their reserved category.

Overview of NTPC Green Energy Ltd

NGEL, a wholly-owned subsidiary of NTPC Ltd, specializes in renewable energy projects. It is the largest public sector enterprise in renewable energy (excluding hydro) based on both operational capacity and power generation.

As of September 30, 2024, NGEL operates a total capacity of 3,320 MW, comprising 3,220 MW of solar and 100 MW of wind projects across 6 states. The company generates revenue by supplying solar and wind power to Indian government agencies and public utilities through Power Purchase Agreements (PPAs).

NTPC Green Energy Key Strengths

  • Strong Parentage: NGEL benefits from being promoted by the NTPC group, a leader in large-scale project execution with long-standing relationships with off-takers and suppliers. The NTPC group contributes ~17% of India’s total installed power capacity and ~24% of its total power generation, reflecting its significant industry presence and effective management capabilities.
  • Diverse Product Portfolio: NGEL boasts an extensive portfolio of utility-scale solar and wind energy projects, catering to PSUs and Indian corporates. As of September 2024, the company had 17 off-takers across 41 solar projects and 1 wind project. Its total portfolio stands at 26,071 MW, including 3,320 MW of operational capacity, 13,576 MW of contracted and awarded projects, and 9,175 MW of pipeline capacity.
  • Impressive Financial Growth: NGEL has demonstrated exceptional growth, with revenue increasing at a CAGR of 47% from Rs 910.42 crore in FY22 to Rs 1,962.59 crore in FY24. Over the same period, net profit surged at a CAGR of 91%, from Rs 94.74 crore to Rs 344.72 crore.
NTPC Green Energy Financials
  • High Creditworthiness: NGEL enjoys a robust financial standing, backed by a strong balance sheet and a "AAA" credit rating from CRISIL as of May 8, 2024. Leveraging NTPC group's excellent credit profile and long-standing relationships with financial institutions, the company is well-positioned to maintain access to low-cost capital.

NTPC Green Energy Risk Factors

  • Off-Taker Dependency: In 2024, 87% of NGEL’s revenue is derived from just 5 off-takers, with the largest contributing around 50%. Losing any key off-taker could significantly impact the firm’s operations and financial health.
  • Geographic Concentration: As of September 2024, 62% of NGEL’s renewable energy capacity is located in Rajasthan. Any major disruptions in the state—whether social, political, economic, or environmental—could negatively affect the company’s business and financial performance.
  • Supply Chain Vulnerability: NGEL’s profitability heavily depends on the availability and cost of critical components like solar modules, cells, and wind turbines. With 36% of supply coming from the largest supplier and 92.65% from the top 10, delays or price increases could adversely affect operations and finances.
  • Execution Challenges: Winning competitive bids and executing projects requires rigorous planning, research, and the ability to operate with tight margins. Future growth depends on the successful execution of ongoing projects. Any cost overruns or project delays could harm the company’s performance and financial stability.

NTPC Green Energy Valuation & Recommendation

NGEL has demonstrated robust revenue and profit growth, supported by a strong balance sheet. The IPO is priced at a P/E ratio of 148x based on FY24 earnings. Though the valuation may limit short-term gains, the company’s growth prospects in a thriving sector remain promising. 

NGEL is India’s largest renewable energy public sector enterprise by operational capacity (excluding hydro). It plans to add 3 GW of capacity in FY25 and 5 GW in FY26, with a target of reaching 19.4 GW of operational renewable capacity by FY27. 

Backed by NTPC’s strong parentage, NGEL benefits from low operating costs, a diversified capacity portfolio, and access to cheaper capital. Taking these factors into account, this IPO is well-suited for long-term investors seeking exposure to India’s rapidly growing renewable energy sector.

For a deep dive into other IPOs, explore: IPO Corner on Liquide