NTPC Green IPO: GMP corrects sharply; SBI Securities on valuation, growth plans & rating

The Rs 10,000 crore IPO of NTPC Green Energy is set to kick-off for bidding on Tuesday, November 19. The company is selling its shares in the range of Rs 102-108 apiece, where investors can apply for a minimum of 138 equity shares and its multiples thereafter. The three-day bidding for the issue will close on Friday, November 22.

Market participants are positive on the company and suggest investors subscribe to the issue for a long-term considering the strong parentage, low cost of capital, growth plans, robust product portfolio and experience in renewable energy project execution.

At the upper price band, NTPC Green Energy is valued at FY24 EV/Ebitda of 53.4 times on post issue capital. It will increase its operational capacity to 6/11/19 GW by FY25E/FY26E/FY27E respectively from 3.3 GW as of September 2024, said SBI Securities. "Based on our back of the envelope calculation, the issue is priced at FY25E/FY26E/FY27E EV/EBITDA multiple of 35.3 times/18.3 times/10.1 times," it said.

The company has exponential growth potential in medium term with its revenue, Ebitda and PAT expected to grow at a CAGR of 79 per cent, 117.2 per cent and 123.8 per cent to Rs 11,250 crore, Rs 9,563 crore and Rs 1,980 crore respectively over FY24-27E period, SBI Securities added with a subscribe for long term recommend for the investors.

Last heard, NPTC Green Energy was commanding a grey market premium (GMP) of Rs 3 per share, suggesting a listing pop of nearly 3 per cent for the investors. However, its premium in the unofficial market stood at Rs 25 before the price band for the issue was announced.

The issue is entirely a fresh share sale of over 92.59 crore equity shares. It has a reservation of shares worth Rs 200 crore to the eligible employees of the company, who will get a discount of Rs 5 per share. Eligible shareholders of NTPC Ltd, the parent company of NTPC Green Energy, have shares worth Rs 1,000 crore reserved for them.

Of the remaining portion, 10 per cent shares shall be allocated to the retail investors, while qualified institutional bidders (QIBs) will have 75 per cent of the net chunk. Remaining 15 per cent allocation shall go to the non-institutional investors. NTPC Green Energy, a wholly-owned subsidiary of NTPC Ltd. This will be the third IPO raising over Rs 10,000 crore in 2024.

In an interaction with Business Today TV, Vinit Bolinkar, Head of Research at Ventura Securities said he is extremely bullish on NTPC Green Energy. He added that he sees massive value unlocking potential in the company considering the company's growth plans, which plans to increase its capacity by 20 times in next 5-7 years.

Kush Ghodasara, an independent Sebi-registered market analyst, said investors should definitely look at the issue from the long-term view. However, he clarified the issue is not for listing gains considering the current volatility in the stock markets.

Incorporated in April 2022, NTPC Green Energy is a wholly-owned subsidiary of NTPC Ltd. NTPC Green is a renewable energy company that focuses on undertaking projects through organic and inorganic routes. The company had an operational capacity of 3,071 MW from solar projects and 100 MW from wind projects across six states as of August 31, 2024.

IDBI Capital Market Services, HDFC Bank, IIFL Securities and Nuvama Wealth Management are the book running lead managers of the NTPC Green Energy IPO, while Kfin Technologies is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE on Wednesday, November 27.