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Buoyed by the primary market buoyancy, public sector companies are gearing up to spin off their green energy business and list it on the exchange. The move will also help the green energy venture to access cheaper funds from global markets.
Some of the large PSUs such as Coal India, ONGC, SJVN, NHPC, India Oil and NLC India have already formed new companies for their new green energy ventures and enjoy the tax reliefs announced by the government.
NTPC Green recently filed papers with SEBI for a ₹10,000-crore initial public offering as it already has a huge solar energy asset. Other PSU green energy ventures would target to raise similar amount through the IPO, said sources.
SJVN plans to invest ₹12,000 crore capex in this fiscal mostly in renewable projects through its subsidiary SJVN Green Energy which targets capacity of 25,000 MW by 2030 and 50,000 MW by 2040.
State-owned Coal India has incorporated two new companies — CIL Navi Karniya Urja and CIL Solar PV — for the development of the solar photovoltaic module. It aims to add 5 gigawatt (GW) of renewable energy capacity by 2028, a year earlier than the company had envisaged.
The Centre has set an ambitious target of having an installed renewable energy capacity of 500 GW by 2030. As of May 26, 2023, coal/lignite CPSEs have installed solar capacity of about 1,656 MW and windmills 51 MW.
Advantages
Vishnu Kant Upadhyay, AVP of Research & Advisory, Master Capital Services said investors gain a variety of advantages from the spin-offs and listing on exchange as usually in IPO there is reservation for investors who own stock in their parent company up to a specific amount. These subsidiaries are often seen as lower-risk investments because they are supported by a reputable parent company and benefit from the financial strength, resources, and market expertise of their parent companies, he added.
Santosh Meena, Head of Research, Swastika Investmart said the listing of subsidiaries often unlocks value, as the subsidiary can focus solely on its specialised operations while the parent company hones in on its core business.
As a standalone company, the newly spun-off subsidiary can raise capital through avenues such as IPOs, debt financing, or other funding mechanisms and free itself from the oversight and constraints of a larger parent company, he said.
Jathin Kaithavalappil, AVP Institutional Research, Choice Broking said green energy sectors spin-offs help these businesses grow independently by raising capital directly from the market through listings, equity offerings and partnerships. With access to potentially lower-cost financing, the spun-off business can scale more efficiently, benefiting investors with enhanced long-term returns, he added.
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