NTPC Green Energy IPO To Close Today; Low GMP, High Valuation

The initial public offering (IPO) of NTPC Green Energy (NGE) is scheduled to close on 22 November for the public subscription after failing to lure huge interests due to valuation concerns and low grey market price (GMP).
 

The state-owned green energy company kept the initial public offering (IPO) issue price at the range of Rs 102 to 108 per share, with a lot size of 138 shares.
 

The company is offering exclusively fresh equities to the public worth Rs 10,000 crore totalling approximately 92.59 crore shares. 
 

During its subscription window, NGE IPO received a total subscription of 1.07 times at the time of filing this report . The retail category got oversubscribed with nearly 3 times subscription, totalling Rs 2,482 crore. 

“In terms of valuation, the IPO is priced aggressively at a price to earnings (PE) ratio of 264 times as of FY 2024, which is significantly higher than its peers. The aggressive valuation suggests that the IPO may be suited for only investors with a high-risk appetite and investing for the long term, while GMP indicates minimal listing gains. The company’s high valuation could pose risks for investors investing with a view of short-term gains,” said Gaurav Garg, Research Analyst, Lemonn Markets Desk.

Revenue, EBITDA, profit after tax (PAT) grew by 47 per cent, 48 per cent and 91 per cent CAGR respectively over FY22-24 on the back of strong energy sales, high-capacity utilisation and low costs.

NGE has maintained strong EBITDA margins at 89 per cent (3-year average) and PAT margins at 20 per cent (3-year average) over FY22-24, led by superior execution and economies of scale.

“At the upper price band of Rs 108, NGE is available at price to book value of 4.9 times (on FY25E annualised financials), which appears to be fairly priced. We assign a ‘Subscribe’ rating for the issue on a long-term investment basis, considering its strong brand recall, superior execution capabilities, portfolio expansions, investment in nextgen energy solutions and promising industry outlook,” stated Geojit Financials. 

The proceeds from the fresh issue worth Rs 7,500 crore will be used for investment in its wholly-owned subsidiary, NTPC Renewable Energy (NREL) for repayment or prepayment, capital expenditure and other general corporate purposes.

As of 20 June 2024, NTPC Green's portfolio consisted of 14,696 MWs including 2,925 MWs of operating projects and 11,771 MWs of contracted and awarded projects. Additionally, it has 10,975 MWs of capacity under the pipeline, aggregating to 25,671 MWs together with its portfolio.

Over the next six to nine years, the company plans 14 GW of pumped hydro-capacity to be commissioned versus the current installed 3.3GW. Under construction is 5.9GW and in the pipeline is 10.8 GW. The company aims to reach 60 GW of renewable capacity by 2032.