Is NTPC Green Energy IPO Good or Bad - Detailed Review
17 November 2024
8 min read
00:00 / 00:00
NTPC Green Energy is kicking off its initial public offering which will be open from November 19, 2024 to November 22, 2024. While considering applying for this IPO, certain questions may arise in your mind, some of which include whether NTPC Green Energy IPO is good or bad, whether it is worth investing in this IPO, and so on.
This article provides a comprehensive NTPC Green Energy IPO review, diving into its business operations and fundamental analysis to help you make a well-informed investment decision.
NTPC Green Energy IPO - Company Overview
Incorporated in 2022, Waree Green Energy Limited is a wholly-owned subsidiary of NTPC Limited and is the largest renewable energy public sector enterprise (excluding hydro) in terms of operating capacity as of September 30, 2024, and power generation in FY24.
The company’s portfolio comprises of solar and wind power assets, distributed across multiple locations in over six states. As of September 30, 2024, the company’s operational capacity consisted of 3,220 MW from solar projects and 100 MW from wind projects across six states.
The renewable energy generated through the company’s projects is fed into the grid to supply utilities or off-takers with power. For its operational projects, the company has entered into long-term Power Purchase Agreements (“PPAs”) or Letters of Award (“LoAs”) with an offtaker that is either a Central government agency like the Solar Energy Corporation of India (“SECI”) or a State government agency or public utility.
(Note: Offtakers are entities or organizations that agree to purchase the electricity or energy generated by a power project, such as a solar or wind farm.)
As of September 30, 2024, the company’s portfolio consisted of 16,896 MW, which included 3,320 MW of operational projects and 13,576 MW of 36 contracted and awarded projects. Furthermore, its capacity under the pipeline consists of 9,175 MW for which a memorandum of understanding (MOU) or term sheet has been signed with joint venture partners or offtakers but without definitive agreements. This brings the company’s total portfolio to 26,071 MW during the aforementioned period.
Additionally, the company is regarded as a preferred partner by many public sector undertakings (PSUs) for the fulfillment of their renewable energy development goals. It has entered into joint venture agreements to generate renewable power with Rajasthan Rajya Vidyut Utpadan Nigam Limited (RRVUNL), Mahatma Phule Renewable Energy & Infrastructure Technology Limited (MAHAPRET), Damodar Valley Corporation (DVC), and two other PSUs. The company has also signed memorandums of understanding (MOUs) or term sheets with other private corporations.
NTPC Green Energy IPO - Financial Overview
The following table shows you the key financial details of NTPC Green Energy IPO for three financial years:
Particulars | Restated Consolidated Financial Information | Special Purpose Carved-Out Combined Financial Statements | |||
Six months ended September 30, 2024 | Six months ended September 30, 2023 | Fiscal 2024 | Fiscal 2023 | Fiscal 2022 | |
Revenue from Operations (Rs in crores) | 1082.29 | 1008.32 | 1962.6 | 1449.71 | 910.42 |
Revenue Growth (%) | 7.34% | N/A | 35.38% | 59.24% | N/A |
Operating EBITDA (Rs in crores) | 931.56 | 914.61 | 1746.47 | 1309.62 | 794.89 |
Operating EBITDA Margin (%) | 86.07% | 90.71% | 88.99% | 90.34% | 87.31% |
Profit before Tax (PBT) (Rs in crores) | 246.37 | 280.8 | 488.2 | 390.89 | 266.9 |
PBT Margin (%) | 22.76% | 27.85% | 24.88% | 26.96% | 29.32% |
Profit after Tax (PAT) (Rs in crores) | 175.3 | 208.16 | 344.72 | 456.49 | 94.74 |
PAT Margin (%) | 16.20% | 20.64% | 17.56% | 31.49% | 10.41% |
Capital Work-in-progress (Rs in crores) | 9030.51 | 1914.02 | 7138.07 | 1749.35 | 6425.69 |
Return on Average Equity (RoAE) (%) | 2.43% (Not Annualized) | 4.17% (Not Annualized) | 6.20% | 13.35% | 5.79% |
Operating Cash Flows (Rs in crores) | 1109.55 | 922.62 | 1579.12 | 740.74 | 674.32 |
Net Debt (Rs in crores) | 15602.05 | 9291.37 | 12324.6 | 5345.1 | 8614.88 |
Net Debt/Equity | 1.91 | 1.82 | 1.98 | 1.09 | 4.41 |
Net Worth (Rs in crores) | 8189.18 | 5095.58 | 6232.14 | 4887.43 | 1951.53 |
Source: RHP of the company
Note: The company states that its carved-out financial data and operating metrics for Fiscal 2022 and Fiscal 2023 were prepared based on estimates and allocations, as it operated as part of NTPC Limited until April 7, 2022. As a result, this data may not fully reflect the company’s performance as an independent entity and should not be used to predict its future performance with certainty.
If we take a look at the financials of NTPC Green Energy IPO, we can see the company’s revenue has steadily increased from Rs. 910.42 crores in FY22 to Rs. 1962.6 crores in FY24.
However, the profits have slightly dropped in FY24 compared to profits in FY23 which is mainly attributed to the company’s depreciation and finance cost. During FY24, the company reported a profit of Rs. 344.72 crores which brings PAT margins to 17.56%. The Return on Average Equity, during the same period, was reported at 6.20% which suggests the company is has generated low returns for its shareholders.
The company’s net debt for FY24 stood at Rs. 12,324.6 crores, resulting in a net debt-to-equity ratio of 1.98. This indicates a high level of leverage, which has led to significant finance costs, thereby exerting pressure on the company’s overall profitability. On a positive note, the company plans to utilize a portion of the proceeds from the IPO to partially or fully settle its debt, which could help reduce finance costs and improve its profitability.
NTPC Green Energy IPO - Industry Overview
Renewable energy is a crucial sector which is rapidly growing in India. As per the recent Crisil reports, India holds the fourth position globally in terms of total renewable energy capacity, as well as wind and solar installations.
In India, the installed capacity of renewable energy sources has witnessed a significant increase from approximately 63 GW as of March 2012 to approximately 201 GW as of September 2024. Furthermore, as of September 2024, grid-connected renewable energy generation capacity accounted for approximately 45% of India’s total installed generation capacity, with solar power driving much of this growth.
NTPC Green Energy IPO - Peer Comparison
Below is the table showing a comparison of NTPC Green Energy with its listed industry peers as of FY24:
Name of the company | Revenue from Operations (in Rs crores) | EPS (Rs) Basic | Operating EBITDA (in Rs crores) | NAV (Rs per share) | RoNW (%) | Net Debt/Equity |
NTPC Green Energy Limited* | 1,962.60 | 0.73 | 1,746.47 | 10.9 | 5.53% | 1.98 |
Adani Green Energy Limited** | 9,220 | 6.21 | 7,586 | 62.08 | 12.81% | 5.52 |
ReNew Energy Global PLC** | 8,194.80 | 9.94 | 5,864.80 | 290.15 | 3.94% | 5.19 |
Source: RHP of the company
From the above table, you can see that NTPC Green Enery falls behind its peers in terms of revenue, EPS and shareholder returns. However, its net debt-to-equity ratio is much lower than its peers, it indicates a less aggressive leverage strategy, potentially reducing financial risk of the company.
NTPC Green Energy IPO - Objective Of The Issue
The net proceeds from the fresh issue of NTPC Green Energy IPO shall be used by the company for the following purposes:
To invest in its wholly-owned subsidiary, NTPC Renewable Energy Limited (NREL), to facilitate the repayment or prepayment, either in full or in part, of certain outstanding borrowings availed by NREL.
General corporate purposes.
NTPC Green Energy IPO Details
NTPC Green Energy IPO Date
NTPC Green Energy IPO is open to subscription from November 19, 2024, to November 22, 2024. The shares will be allocated to investors on November 25, 2024, and the company will be listed in the NSE and BSE on November 27, 2024
NTPC Green Energy IPO Issue Price
NTPC Green Energy is offering its shares in the price band of Rs.102 to Rs.108 apiece. This means you would require an investment of Rs.14,904 per lot (138 shares) if you are bidding for the IPO at the upper price band.
NTPC Green Energy IPO Size
NTPC Green Energy is offering a total of 925,925,926 shares, amounting to Rs. 10,000 Crores which will be entirely done through a fresh issue.
NTPC Green Energy IPO GMP
Many investors look at the Grey Market Premium (GMP) before applying for NTPC Green Energy. The GMP gives an idea of market sentiment and can hint at the possible listing price. However, it should be noted that it does not reflect how financially strong NTPC Green Energy is. Thus, it is important to financially analyze the stock before investing in it.
NTPC Green Energy IPO Allotment Status
The shares from NTPC Green Energy IPO will be allotted to its investors on November 25, 2024. One can check the allotment status for NTPC Green Energy IPO from its registrar KFin Technologies Limited, the BSE website, or your broking platform where you have applied for the NTPC Green Energy IPO.
NTPC Green Energy IPO Application Link
Open demat account with Rupeezy today and enjoy a seamless experience when applying for the IPO. With an easy-to-use platform, Rupeezy makes the IPO application process quick and hassle-free. Click on the apply link below to get started.
Is NTPC Green Energy IPO a Good or Bad Investment? Final Thoughts
NTPC Green Energy IPO Review: While NTPC Green Energy shows promise due to its strong parentage and significant growth potential in India's expanding renewable energy sector, investors should be cautious due to its high debt levels and lower profitability compared to peers. However, the company's plans to use IPO proceeds for debt reduction could improve its financial health. Therefore, Investors are advised to carefully evaluate all associated risk factors and conduct their own thorough analysis before making a decision to invest in this IPO.
For those interested in investing in such IPOs, you can open demat account with Rupeezy. Our trading platform allows you to participate in various investment opportunities including initial public offerings.
