NTPC Green Energy Ltd (NGEL), a fully owned subsidiary of NTPC Ltd, is set to launch its initial public offering (IPO) on Tuesday, November 19. As of September 2024, it stands as the largest renewable energy public sector enterprise (excluding hydro energy) in terms of operating capacity.
In SBI’s latest securities report, experts suggest subscribing to the IPO at the cut-off price, which is guaranteed by the company’s significant growth potential and promising long-term returns.
The report said, “We recommend investors to subscribe to the issue at cut-off price for long term.” However, the report also warns that NGEL financial performance could be impacted by the timely completion of its contracted projects.
IPO aims to raise
According to reports, the company aims to raise Rs 10,000 crore through this initial offering. The company is largely dependent on a small group of power purchasers, who have contributed over 97 per cent of its revenue in recent years.
IPO dates and price band
The subscription period for the IPO opens on November 19, 2024, and closes on November 22, 2024. The price band is set between Rs 102 and Rs 108 per share.
At the upper price band of Rs 108 per share, NGEL is valued at an FY24 EV/EBITDA multiple of 53.4x. Considering the company’s strong growth potential, analysts suggest subscribing to the IPO at the cut-off price for long-term benefits, news agency ANI reported.
Additionally, returns are heavily dependent on imported solar panels and other components, which lack long-term contracts, making the company vulnerable to potential supply chain disruptions.
The report says that the company is majorly dependent on the availability and cost of components of its solar, wind and other projects including solar modules, solar cells, wind turbine generators and other materials.
“The company purchases major components such as solar panels, inverters, wind turbines and some components of power evacuation systems directly from a number of domestic and international manufacturers and does not have any long term supply contracts with them,” the report said.
It also suggests investors should also take into account risks such as the high concentration of NGEL’s operational projects in Rajasthan (62.2 per cent), which makes the company susceptible to regional vulnerabilities.
“The company is dependent for winning competitive bids for renewable energy projects which require extensive research, planning, due diligence and capacity to operate with low operating margins for sustained period of time. Future growth of the company is significantly dependent on successful execution of contracted & awarded projects.”
It also highlighted that business, operation results and financial stability of the company may be adversely affected by any cost-overruns or failure to successfully execute projects.
The company’s operational capacity stands at 3,220 MW of solar and 100 MW of wind projects, as of September 2024.
Additionally, it has 13,576 MW of contracted and awarded projects, along with 9,175 MW in the pipeline. The company also plans to expand its operational capacity to 19 GW by FY27, as a part of its growth strategy.
NTPC Ltd, a ‘Maharatna’ central public sector enterprise, accounts for 24 per cent of India’s total power generation and has set a target to expand its renewable energy capacity to 60 GW by 2032. Its renewable wing, NGEL, also plays a role in helping the company achieve this objective with projects that are geographically diversified across Rajasthan, Gujarat and Uttar Pradesh and Tamil Nadu.
