NTPC Green Energy IPO GMP dips: Is it worth subscribing? 3 risks to consider

NTPC Green Energy IPO: The price band has been set between Rs 102 and Rs 108 per share, with a minimum application size of 138 shares, amounting to Rs 14,904 for retail investors.

In Short

• NTPC Green Energy IPO sees 36% subscription on first day
• Analysts highlight risks like revenue concentration, high valuation
• Most brokerages advise IPO for long-term, high-risk investors

The initial public offering (IPO) of NTPC Green Energy drew moderate interest from investors on the first day of bidding. Despite a brief rally in the stock market on Tuesday, the IPO saw only 36% subscription on its first day.

The IPO, which aims to raise Rs 10,000 crore through the sale of 92.59 crore fresh shares, opened for bidding on Tuesday and will close on November 22, 2024. The price band has been set between Rs 102 and Rs 108 per share, with a minimum application size of 138 shares, amounting to Rs 14,904 for retail investors.

Retail investors showed significant interest, with their portion subscribed 1.46 times. However, the Qualified Institutional Buyers (QIB) category recorded no subscriptions, and the Non-Institutional Investors (NII) segment saw a subscription of only 0.17 times.

RISKS ASSOCIATED WITH THE IPO

While NTPC Green Energy operates in the fast-growing renewable energy sector, several risks have been highlighted by analysts:

Revenue concentration and dependency - The company derives a large portion of its revenue from its top five customers, creating vulnerability if any of them reduce or cancel agreements.

"Heavy reliance on a few major customers creates revenue vulnerability," said a report from Bajaj Broking.

Project location risks - A number of the company's renewable energy projects are located in Rajasthan, increasing exposure to risks from local disruptions.

"Recently, its operating renewable energy projects are concentrated in Rajasthan," said Swastika Investmart Ltd.

High valuation and competitive risks - The IPO is priced at a price-to-earnings (P/E) ratio of 264x based on FY24 earnings, significantly higher than peers.

"The aggressive valuation suggests that the IPO may be suited only for investors with a high-risk appetite and long-term goals," said Lemonn.

SHOULD YOU SUBSCRIBE?

Most brokerages are advising caution, recommending the IPO only for long-term investors with a high tolerance for risk.

• Swastika Investmart Ltd gave the IPO a "SUBSCRIBE (FOR LONG TERM)" rating.
• Bajaj Broking echoed this sentiment, recommending the IPO for investors with a long-term perspective.
• "Looking at attributes, we recommend only risk-taking investors to ‘SUBSCRIBE’ for the NTPC Green Energy IPO from a long-term perspective," said Rajan Shinde, Research Analyst at Mehta Equities Ltd.

NTPC GREEN ENERGY IPO LATEST GMP

The grey market premium (GMP) for NTPC Green Energy IPO has been seeing a decline before it opened for subscrioption and has now fallen under Rs 1.

The current GMP is Rs 0.80 suggesting a potential listing gain of approximately 0.74% over the higher end of the price band. This is a dip from its GMP of Rs 11 reported a few days ago, reflecting some cooling in investor sentiment ahead of the listing.

(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.)