NTPC Green Energy IPO: A Significant Opportunity for Investors and NTPC Shareholders
NTPC Green Energy, a subsidiary of India’s largest power producer NTPC, filed a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) for a Rs 10,000-crore initial public offering (IPO). The public issue, which could become India’s largest in 2024, will be entirely a fresh issue of equity shares, with no offer for sale from the promoter entities.
One of the key highlights of the IPO is the quota reserved for existing shareholders of NTPC Ltd. A maximum of 10% of the issue has been earmarked under this category, providing an opportunity for NTPC shareholders to participate in the IPO. Investors holding shares of NTPC as of the date of filing the red herring prospectus (RHP) will be eligible for this quota.
Main Points
NTPC Green Energy’s Growth Prospects and NTPC Stock Rerating
NTPC Green Energy’s growth prospects could prompt a rerating of NTPC stock. Jefferies, a global investment bank, has a ‘buy’ rating on NTPC shares with a target price of Rs 485 per share, citing strong growth in its renewable energy business. This target price implies a 17% upside from the last closing price of Rs 413.8.
The brokerage firm highlighted that renewable energy bids have ramped up significantly, with FY24 witnessing awards of 37-39 GW, compared to 8-9 GW in the previous year. NTPC is on track to meet its 60 GW renewable energy target by 2032, with 24 GW of the capacity pipeline already in place. The ramp-up in renewable energy capacity and the company’s green hydrogen pilot projects are key drivers for the rerating of NTPC stock, according to Jefferies.
Significant Value Unlocking for NTPC
NTPC Green Energy’s management aims to unlock substantial value through the listing of its renewable energy business. The company’s leadership had previously indicated that the IPO would be launched by the end of 2024, following a detailed plan laid out earlier in May. The Rs 10,000-crore offering will mark the biggest share sale by a public sector undertaking (PSU) since Life Insurance Corporation’s Rs 21,000-crore IPO in May 2022.
The proceeds from the IPO are expected to fund NTPC Green Energy’s ongoing and future projects, which include investments in solar energy, green hydrogen, and green ammonia.
NTPC Green Energy’s Growth Plans
NTPC Green Energy, incorporated in April 2022 to consolidate the parent company’s renewable energy assets, currently has 3.3 GW of installed capacity, with an additional 5.9 GW under construction. The company’s growth pipeline includes 10.8 GW of projects, with bids won and bilateral agreements in place. NTPC Green Energy has set an ambitious target of expanding its renewable capacity to 60 GW by 2032.
The filing of the DRHP comes at a time when the Indian IPO market is booming. So far in 2024, about 235 companies have raised more than $8.6 billion, which already exceeds the total amount raised in 2023. India’s benchmark Nifty 50 index has hit record highs more than fifty times this year.
The filing also coincides with power producers’ increased focus on renewables and their pledges to expand green energy capacities. The Indian government is aiming to add at least 500 GW of clean energy by 2030 to reduce emissions.
Potential Investor Interest
The IPO is expected to attract significant investor interest, especially as green energy remains a key focus in the near term. Kranthi Bathini, director of equity strategy at WealthMills Securities, stated that investors would definitely want a slice of this pie, considering the fact that green energy will remain in focus in the near future.
