NTPC Green IPO review (May apply)

• IPO Details
• Docs
  • RHP
  • DRHP
• Reviews
• Subscription
• Calculator
• News
• GMP
• Allotment
• BoA
• Messages

Review By Dilip Davda on November 14, 2024

•    The company is the wholly owned subsidiary of NTPC Ltd., a "Maharatna" PSU.
•    It is the largest renewable energy public sector enterprise (excluding hydro).
•    The company is having solar, wind power generation assets and is now adding hydroelectric process.
•    It has posted profits for the reported periods of its financial performance. 
•    The company is expanding its capacities to meet the Government of India's target of renewable energy power generation assets.
•    Based on FY25 annualized earnings, the issue is aggressively priced. 
•    It's a pure long term story and hence, well-informed/cash surplus investors may park moderate funds.

ABOUT COMPANY:
NTPC Green Energy Ltd.  (NGEL) is a wholly owned subsidiary of NTPC Limited, a 'Maharatna' central public sector enterprise. It 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. (Source: CRISIL Report, November 2024). Its renewable energy portfolio encompasses both solar and wind power assets with presence across multiple locations in more than six states which helps mitigate the risk of location-specific generation variability. (Source: CRISIL Report, November 2024). 

NGEL's operational capacity was 3,220 MW of solar projects and 100 MW of wind projects across six (6) states as of September 30, 2024. It has strategically focused on developing a portfolio of utility-scale renewable energy projects, as well as projects for public sector undertakings ("PSUs") and Indian corporates. Its projects generate renewable power and feed that power into the grid, supplying a utility or off taker with energy. For its operational projects, the company has entered into long-term Power Purchase Agreements ("PPAs") or Letters of Award ("LoAs") with an off taker that is either a Central government agency like the Solar Energy Corporation of India ("SECI") or a State government agency or public utility.

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. As of September 30, 2024, its "Capacity under Pipeline, for which a memorandum of understanding ("MOU") or term sheet has been entered with joint venture partners or off takers but where definitive agreements have not yet been entered, consisted of 9,175 MWs. As of September 30, 2024, its Capacity under Pipeline together with Portfolio consisted of 26,071 MWs.

It measures the rated capacity of its plants in megawatts in alternate current (AC). Rated capacity is the expected maximum output that a power plant can produce without exceeding its design limits. "Megawatts Operating" represents the aggregate megawatt rated capacity of renewable power plants that are commissioned and operational as of the reporting date. "Megawatts Contracted & Awarded" represents the aggregate megawatt rated capacity of renewable power plants as of the reported date which include (i) PPAs signed with customers, and (ii) capacity won and allotted in auctions and where LoAs have been received.

As of March 31, 2024, its operating/contracted and awarded megawatts capacities were 12396 MW for Solar and 2100 MW for Wind, which was at 6011 MW and 2300 MW as of March 31, 2022 respectively. As of September 30, 2024 it stood at 13796 MW and 3100 MW respectively. The solar energy contributes over 93% in its total revenues. Its capacity expansion in pipeline for Solar is 6925 MW and Wind 2250 MW as of September 30, 2024. 

The company believes that it, along with the NTPC Group, have strong in-house experience in renewable energy project execution and procurement. In solar projects, it usually takes responsibility for procurement of major equipment and supplies and the contractor builds, commissions and hands over the solar plant. It also uses the turnkey EPC contract model based on specific project conditions. In wind projects, the company generally uses the turnkey EPC model, entering into contracts with OEMs for manufacturing, installing, and commissioning wind turbines and the balance of plant. Operation and maintenance ("O&M") services for its renewable energy projects are provided through third-party service providers.

As of September 30, 2024, its workforce comprised 232 employees, and the company utilised the services of 45 contract labourers.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO worth Rs. 10000.00 cr. (approx. 925925926 shares at the upper cap) of Rs. 10 each. The company has announced a price band of Rs. 102 - Rs. 108 per share. The issue opens for subscription on November 19, 2024, and will close on November 22, 2024. The minimum application to be made is for 138 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The IPO constitutes 10.99% of the post-IPO paid-up equity capital of the company. From the net proceeds of the fresh equity issue, the company will utilize Rs. 7500.00 cr. for investment in its wholly owned subsidiary NTPC Renewable Energy Ltd. to repay/prepay its certain borrowings, and the rest for general corporate purposes. 

The company has reserved equity shares worth Rs. 200.00 cr. for its eligible employees and offering them a discount of Rs. 5 per share, it has also reserved shares worth Rs. 1000 cr. for the shareholders of parent company NTPC Ltd., and from the rest, it has allocated not less than 75% for QIBs, not more than 15% for HNIs and not more than 10% for Retail investors. 

The joint Book Running Lead Managers (BRLMs) to this issue are IDBI Capital Markets & Securities Ltd., HDFC Bank Ltd., IIFL Capital Services Ltd., and Nuvama Wealth Management Ltd., while KFin Technologies Ltd. is the registrar to the issue. Syndicate member for this issue are HDFC Securities Ltd., and Nuvama Wealth Management Ltd.

The company has issued entire equity capital at par value so far. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 10.00 per share. 

Post IPO, company's current paid-up equity capital of Rs. 7500.00 cr. will stand enhanced to Rs. 8425.93 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 91000 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a total income/net profit Rs. 170.63 cr. / Rs. 171.23 cr. (FY23), and Rs. 2037.66 cr. / Rs. 344.72 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it posted a net profit of Rs. 175.30 cr. on a total income of Rs. 1132.74 cr. Thus it marked sharp jump in its top and bottom lines from FY24 onwards, indicating its current status and likely future trends considering its expansion plans afoot. FY23 profits includes deferred tax credit of Rs. 118.68 cr. 

For the last three fiscals, the company has reported an average EPS of Rs. NA, and an average RoNW of 6.69 %. The issue is priced at a P/BV of 9.89 based on its NAV of Rs. 10.92 as of September 30, 2024, and is at a P/BV of 5.00 based on its post-IPO NAV of Rs. 21.59 per share (At upper cap). 

If we attribute annualized FY25 earnings to post-IPO fully diluted equity base, then the asking price is at a P/E of 257.14 and based on FY24 earnings, the P/E stands at 263.41. Thus the issue appears aggressively priced. But considering its current established capacities and future expanded capacities, this is a pure long term story. As clarified by the management, the company has no impact of US policy on renewable energy as it is having operations only in India. It is going to be the leader in the segment with additional activities on hydroelectric projects. 
 
For the reported financial periods, the company has reported PAT margins of 31.49% (FY23), 17.56% (FY24), 16.20% (H1-FY25), but RoCE margins data is missing from the offer documents. 

DIVIDEND POLICY:
The company has not declared any dividends since its incorporate (April 07, 2022). It adopted a dividend policy in September 2024, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Adani Green and ReNew Energy Global PLC, as their listed/unlisted peers. The listed peer is trading at a P/E of around 184 (as of November 14, 2024). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
The four BRLMs associated with the offer have handled 52 public issues in the past three fiscals, out of which 14 issues have closed below the offer price on listing date.

NTPC Green Energy IPO FAQs