NTPC Green Energy Limited (NGEL), the renewable energy arm of NTPC, is set to launch its initial public offering (IPO) on November 19, 2024, with a price band of ₹102-108 per share. The IPO aims to raise ₹10,000 crore through fresh issues, primarily to repay subsidiary borrowings and for general corporate purposes.

Reliance Securities has recommended a “Subscribe” rating for the IPO, citing the company’s robust financial performance, diversified renewable energy portfolio, and its strategic position in India’s green energy transition.

Financial highlights

NGEL’s revenue has grown at a compound annual growth rate (CAGR) of 46.8%, reaching ₹1,963 crore in FY24, up from ₹910 crore in FY22. Profit after tax (PAT) increased at a CAGR of 90.8% during the same period, although margins exhibited some variability. The EBITDA margin stood at 89% in FY24. The company’s debt-to-equity ratio, at 1.98 as of FY24, underscores its capacity to manage financial commitments effectively.

The company has an operational renewable energy capacity of 3,220 MW in solar and 100 MW in wind, with plans to expand this significantly. As of September 2024, NGEL holds a pipeline of 26 GW in solar and wind projects.

Strategic growth drivers

NGEL benefits from its association with NTPC, India’s largest power producer, which provides financial stability and access to extensive operational expertise. The company leverages advanced technologies, such as robotic cleaning systems and drone thermography, to enhance operational efficiency in its renewable projects.

Reliance Securities highlighted NGEL’s ventures into emerging sectors such as green hydrogen and large-scale battery storage as key growth areas. These initiatives align with India’s net-zero goals and position NGEL as a leader in the renewable energy sector. Should you invest?

Risks and considerations

The brokerage cautioned about potential risks, including payment delays from power distribution companies (discoms) and intensifying competition in the renewable energy sector. However, NGEL’s long-term power purchase agreements (PPAs) and the government’s favorable policies in renewable energy mitigate these concerns.

Investor allocation

The IPO allocates 75% of the issue to qualified institutional buyers (QIBs), 15% to non-institutional investors (NIIs), and 10% to retail investors. The minimum bid lot is set at 138 shares.

Reliance Securities views NGEL’s strategic initiatives and financial strength as compelling reasons for long-term investment. “With a prudent business model and consistent earnings growth, NGEL is well-positioned to capitalize on the increasing demand for renewable energy in India,” the brokerage stated.

The IPO closes on November 22, 2024, with an implied market capitalisation of ₹91,000 crore at the upper price band.

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