IPO Size: Rs.10,000 cr, Entirely Fresh Issue

• To repay Rs. 7,500 cr debt of Rs.15,602 cr net debt

Price band: Rs. 102-108 per share

• 75% reserved for institutions and only 10% for retail, as the company was incorporated less than 3 year ago, on 7^th April 2022

M cap: Rs. 91,000 cr, implying 11% dilution

IPO Date: Tue 19^th Nov to Fri 22^nd Nov 2024, Listing Wed 27^th Nov 2024

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Green Energy PSU

NTPC Green Energy, a wholly owned subsidiary of India’s largest power company NTPC Limited, has a portfolio of 3.32 GW renewable energy (RE) capacity under operation, as of 30.9.24, comprising 3.2 GW solar energy projects and 0.1 GW wind energy. 13.58 GW capacity is contracted and awarded, taking portfolio to 16.90 GW (operational + under development). BY 2032E, it targets 60 GW renewable energy capacity.

IPO to retire Existing Debt, not fund New Capacity

For 13.58 GW contracted and awarded capacity, 10.6 GW capacity is solar and 3 GW is wind. Applying benchmark of Rs. 5 cr capex per MW for solar and Rs. 8 cr for wind, company will need close to Rs. 77,000 cr investment, of which, Rs. 9,031 cr has been incurred (capital work in progress as of 30.9.24). Balance approximately Rs. 68,000 cr funding is planned, as Rs. 55,000 cr debt and Rs. 13,600 cr equity. This implies that post IPO, company will need a further and significant dilution and current debt equity ratio of 1.9:1 may not decline much, in the medium term.  

Other RE Initiatives

NTPC Green has acquired land for India’s largest green hydrogen hub (of 1,100 TPD) in Andhra Pradesh, including developing battery storage, solar PV modules, electrolyzer and 2.7 GW round-the-clock RE projects. It also plans a 10GW RE park in Maharashtra, 25 GW RE park in Rajasthan and up,to 1 million MT green hydrogen project in Rajasthan.

Depreciation and Interest expense strain Financials

FY24 revenue and EBITDA stood at Rs.1,962 cr and Rs. 1,822 cr respectively, with PAT of Rs. 345 cr. Monsoon reduced power generation in Q2FY25, resulting in revenue of Rs. 504 cr, against Rs. 578 cr for Q1FY25. EBITDA for Q2FY25 slipped to Rs. 441 cr, from Rs. 541 cr QoQ, with fall in PAT more drastic to Rs. 37 cr, from Rs. 139 cr sequentially, as depreciation and finance cost are huge. On a net worth of Rs. 8,189 cr (comprising Rs. 7,500 cr equity infusion by parent), RoE for H1FY25 stood at 2.4% non-annualised.  

Sky-High Pricing

On FY25E EBITDA of Rs. 2,150 cr, IPO of NTPC Green is priced at EV/EBITDA multiple of 46x and EV per effective MW of Rs. 18 cr, on 4.9 GW capacity (including cwip). Recently listed Acme Solar, with 1.3 GW operational solar capacity, is trading at an EV of less than Rs.7 cr per MW. Larger private sector peer Adani Green Energy, having 11.2 GW operational capacity and 13% RoE, is ruling at an EV/EBITDA multiple of 29x and EV per effective MW of Rs. 21 cr. Thus, NTPC Green’s IPO is priced higher than Adani Green on earnings basis, despite much smaller size. On capacity basis, the pricing is nearly as much as Adani Green. 

For Rs. 5 cr per MW capex for solar, some premium for operating assets is understandable. But a premium of 250% is uncalled for, that too for a 3 year old company. Parent holds track-record in conventional power, and its contribution to growth capital may be limited going forward, which will be vital to materialize the ambitious capacity addition plans.

Such aggressive pricing from a Government company is disappointing, more so, in the current ‘jittery’ secondary market conditions. For the sake of larger investor community, we hope that NTPC Green is not a repeat of NHPC IPO, priced at Rs. 35 per share in Sep 2009, which took ~13 years for investors to just recover cost.