NTPC Green Energy IPO: 3 reasons why you should subscribe

NTPC Green Energy IPO: The subscription for NTPC Green Energy IPO will close on November 22, 2024 and the price band is set between Rs 102 and Rs 108 per share.

In Short

• Strong growth with FY24 income at Rs 2,037.66 crore
• India's renewable capacity grew to 201 GW by September 2024
• Government support boosts NTPC Green Energy's prospects

The initial public offering (IPO) of NTPC Green Energy Limited opened for bidding on Tuesday, aiming to raise Rs 10,000 crore through a fresh issue of 92.59 crore shares.

The subscription window for the NTPC Green Energy IPO will close on November 22, 2024 and the price band is set between Rs 102 and Rs 108 per share. Retail investors can participate with a minimum application of 138 shares, requiring an investment of Rs 14,904.

Let’s look at three key reasons why investors might consider subscribing to this IPO.

STRONG BUSINESS FOUNDATION AND PERFORMANCE

NTPC Green Energy Limited, a wholly owned subsidiary of NTPC Limited, is India’s largest renewable energy public sector enterprise. The company has a robust portfolio of 16,896 MW of solar and wind projects diversified across various geographies and customers.

Financially, NTPC Green Energy has shown steady growth. The company reported a total income of Rs 170.63 crore and a net profit of Rs 171.23 crore in FY23. For FY24, its total income surged to Rs 2,037.66 crore, with a net profit of Rs 344.72 crore. In the first half of FY25, ending September 30, 2024, it achieved a net profit of Rs 175.30 crore on a total income of Rs 1,132.74 crore.

Despite an aggressive price-to-earnings (P/E) ratio of 257.14 based on annualised FY25 earnings, analysts see this as a long-term investment opportunity.

Swastika Investmart’s IPO report highlights the company's experienced management, strong project execution capabilities, growing revenues, and excellent credit ratings as significant positives.

"Experienced team in renewable energy project execution and procurement. Growing revenues along with strong credit ratings. Experienced Management Team," said the IPO report from Swastika Investmart.

PROMISING MARKET OPPORTUNITY

India is one of the fastest-growing markets for renewable energy, ranking fourth globally in renewable, wind, and solar installations. The country’s renewable energy capacity has grown from 63 GW in 2012 to approximately 201 GW (including large hydro) as of September 2024. Solar power has been the key driver, increasing from 0.09 GW in March 2012 to 91 GW in September 2024.

At the COP26 climate summit, India committed to reducing its emissions intensity by 45% by 2030, achieving 50% cumulative electric power capacity from non-fossil fuel sources by 2030, and reaching net-zero emissions by 2070. These targets present significant opportunities for companies like NTPC Green Energy to play a pivotal role in India's transition to clean energy.

An IPO report from Lemonn's highlighted India’s rising energy demand, projected to grow at a compound annual growth rate (CAGR) of 5.5% from FY24 to FY29. This growth, coupled with government reforms and expanding infrastructure, creates a favourable environment for renewable energy players.

"India’s Energy Demand stood at 1,627 BU in FY24 and is projected to grow at a CAGR of ~5.5% between FY24-FY29P to reach 2,170 BU. The growth would be driven by infrastructure-linked capex, strong economic fundamentals along with expansion of the power footprint via strengthening of T&D infrastructure, coupled with major reforms initiated by the Government of India," the report said.

GOVERNMENT SUPPORT AND GROWTH POTENTIAL

The government has introduced multiple schemes and incentives to promote renewable energy. As a government-backed enterprise, NTPC Green Energy is well-positioned to benefit from these initiatives. The company’s projects operate solely in India, making it immune to international policy changes in renewable energy.

Bajaj Broking highlights that NTPC Green Energy’s strong project pipeline and future expansion plans make it an attractive long-term investment. The company’s focus on clean energy aligns with the country’s ambitious climate goals, giving it a strategic edge in the market.

"Over the past two fiscal years, the company reported a total income/net profit of Rs170.63 crore / Rs 171.23 crore for FY23 and Rs 2037.66 crore/ Rs 344.72 crore for FY24. In the first half of FY25, ending on September 30, 2024, it achieved a net profit of Rs 175.30
crore on a total income of Rs 1132.74 crore. This demonstrates a significant increase in both revenue and profit from FY24 onwards, reflecting the company's current status and positive future prospects given its expansion plans," it said.

The allotment of shares for NTPC Green Energy is expected to be finalised by November 25, 2024, and the stock is expected to list on the BSE and NSE on November 27, 2024.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)