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NTPC Green Energy IPO: Its grey market premium or GMP has remained unchanged at a subdued Rs 1, or only 0.93 per cent over the IPO’s upper price band of Rs 108, for the past three days. Should you apply for the IPO? Check brokerage…Read More
NTPC Green Energy IPO.
NTPC Green Energy IPO: The initial public offering of NTPC Green Energy IPO, which is an umbrella company for the green business initiatives of state-owned power giant NTPC, is going to be opened on Tuesday, November 19. Though it has been a much-awaited IPO, the latest GMP trend shows a subdued interest from investors.
The Rs 10,000-crore IPO will be launched on November 19 and concluded on November 22. The price band of the IPO has been fixed in the range of Rs 102-Rs 108.
According to market observers, the company’s grey market premium (GMP) remains unchanged at a subdued Rs 1, or only 0.93 per cent over the IPO’s upper price band of Rs 108, for the past three days. Analysts says this low level of GMP signals a very low interest from investors, especially non-institutional investors (NII).
However, the GMP has fallen steeply in the past 15 days.
The GMP is based on market sentiments and keeps changing. ‘Grey market premium’ indicates investors’ readiness to pay more than the issue price.
According to IPO Mantra’s R K, “Initially in September 2024, the price band was expected around Rs 25-30. GMP was more than 100 per cent at that time. In October, news came of Rs 40-50 price band. Demand remained same. In November, it came to know that price band may come around Rs 120-125. All GMP vanished. Finally, IPO price came at Rs 108. And, there is hardly any interest. A perfect example that how steep pricing can kill all the enthusiasm.”
Another market analyst said the fall in GMP is part of overall pessimism towards to IPOs after the recent subdued listings like Hyundai Motor India and Afcons IPO. “This might be due to overall bearish trend in the stock markets.”
NTPC Green Energy IPO: Shareholders’ Quota
Shareholders of its parent entity NTPC Ltd will have an upper edge in the much-awaited offering as they have 10 per cent quota. According to the red herring prospectus (RHP), Rs 1,000 crore of the Rs 10,000-crore IPO will be reserved for NTPC’s shareholders and any investor holding even one share of NTPC will be eligible to apply under the shareholder quota, thus increasing chances of the IPO allotment.
According to the RHP, “equity shares with a face value of Rs 10 each will be allocated to eligible shareholders on a proportionate basis, with this reserved portion not exceeding 10 per cent of the total issue size.”
NTPC Green Energy IPO Shareholders’ Quota: Who Are Eligible?
Under this, investors holding NTPC’s shares in their demat account as of the RHP filing date — November 13 — will be able to apply for the NTPC Green Energy IPO under the 10% shareholder quota.
Shares of NTPC Ltd were trading lower by 2.28 per cent at Rs 364 apiece on the BSE on Monday, a day before the NTPC Green Energy IPO.
NTPC Green Energy IPO: Can You Buy NTPC Shares Now for Shareholder Quota?
No, the cutoff date was November 13. So, purchasing NTPC’s shares now will not make any investor eligible under the shareholder quota of the NTPC Green Energy IPO.
According to a market observer, “If you know anybody who currently holds NTPC’s shares, you can ask them to apply for the IPO on your behalf. That’s the only way now for those not holding the shares.”
NTPC Green Energy IPO: Why It Garnered Significant Interest Initially?
After the recent bumper listings of two green energy companies — Premiere Energies and Waaree Energies, investors are now finding another opportunity to invest in a green energy company’s IPO, especially when it’s a subsidiary of a state-owned power giant in India. However, the shares of Premiere Energies and Waaree Energies have faced significant sell-off pressure in the past few days.
NTPC Green Energy IPO: Should You Apply? Analysts’ Recommendations
Most brokerages have given ‘subscribe for long term’ recommendations for the IPO.
SBI Securities in its IPO note said, “NGEL has a large portfolio of utility-scale solar and wind energy projects coupled with projects for PSUs and Indian corporates. The company along with the NTPC Group have a strong track record of developing, constructing and operating renewable power projects, driven by experienced in-house management and procurement teams.”
At the upper price band of Rs 108, NGEL is valued at FY24 EV/EBITDA of 53.4x on post issue capital. The company will increase its operational capacity to 6/11/19 GW by FY25E/FY26E/FY27E respectively from 3.3 GW as of September 2024. Basis our back of the envelope calculation, at upper price band, the issue is priced at FY25E/FY26E/FY27E EV/EBITDA multiple of 35.3x/18.3x/10.1x and EV/MW of Rs 16.8 cr/9.0 cr/5.1 cr respectively. The company has exponential growth potential in medium term with its Revenue/EBITDA/PAT expected to grow at a CAGR of 79.0%/117.2%/123.8% to Rs 11,250 cr/9,563 cr/1,980 cr respectively over FY24-27E period.
“We recommend investors to subscribe to the issue at cut-off price for long term,” SBI Securities said in the note.
Another brokerage firm Reliance Securities also granted a ‘subscribe for long term’ rating to the IPO.
It said NGEL benefits from NTPC’s financial strength and long-term relationships with off takers and suppliers, growing its revenues along with strong credit ratings that enable a low cost of debt executing large scale projects. NGEL has deep domain expertise of the management team focusing on new energy solutions like green hydrogen, green chemicals and storage with prudent growth and contributing towards fulfilling India’s net zero goals.
“We believe with a prudent business model and strong earnings growth with improved financials and return ratios, we recommend a Subscribe to the issue for the long term,” Reliance Securities said.
Kranthi Bathini, director of equity strategy at WealthMills Securities, has said the IPO comes at a time when thermal power-heavy NTPC is looking for other energy avenues to diversify into and bolster revenues,” .
“Considering the fact that green energy will remain in focus in the near future, investors would definitely want a slice of this pie, “Bathini added.
NTPC Green Energy IPO: More Details
The IPO is entirely a fresh issue of up to Rs 10,000 crore with no offer for sale component. A discount of Rs 5 per equity share is being offered to eligible employees bidding in the employee reservation portion.
The IPO will remain opened between November 19 and November 22. The allotment is scheduled to be finalised on November 25, while the listing will take place November 27.
The proceeds from its fresh issuance will be utilised to the extent of Rs 7 500 crore for investment in its wholly-owned subsidiary, NTPC Renewable Energy Limited (NREL) for repayment/ prepayment, in full or in part of certain outstanding borrowings availed by NREL and general corporate purposes.
NTPC Green Energy is the largest renewable energy public sector enterprise (excluding hydro) in terms of operating capacity as of September 30, 2024 and power generation in Fiscal 2024, according to a CRISIL Report, November 2024.
As of September 30, 2024, its portfolio consisted of 16,896 MWs including 3,320 MWs of operating projects and 13,576 MWs of contracted and awarded projects. NTPC Green Energy’s revenue from operations has grown at a CAGR of 46.82 per cent from Rs 910.42 crore in Fiscal 2022 (on a special purpose carved-out basis) to Rs 1,962.60 crore in Fiscal 2024 (on a restated basis).