NTPC Green Energy IPO: Should You Invest Or Not?

The initial public offering of NTPC Green Energy Ltd. is poised for strong returns in the long run as it benefits from the state-run parent NTPC Ltd.'s financial strength and long-term relationships, with buyers and suppliers, according to analysts.

In what will be the third-largest maiden public issue this year, NTPC Green's Rs 10,000-crore issue will be open for bidding on Nov. 19 at a price band of Rs 102 to Rs 108 per share.

NTPC's green arm has the domain expertise of the management team focusing on new energy solutions with prudent growth, Reliance Securities said in a note. "With a prudent business model and strong earnings growth with improved financials and return ratios, we recommend a 'subscribe' to the issue for the long term."

Strong parentage, robust product portfolio with diversification across geographies, experience in execution and low cost of capital makes it a compelling case, according to SBI Securities.

At the upper price band of Rs 108 per share, the company is valued at fiscal 2024 enterprise value to Ebitda of 53.4 times on post-issue capital, the brokerage said.

The company has exponential growth potential in the medium term, with its profit after tax expected to grow at a CAGR of 123.8% over fiscal 2024-27 period, it said. "We recommend investors to subscribe to the issue at cut-off price for long term."

Thus the issue appears aggressively priced, according to Bajaj Broking. "But considering its current established capacities and future expanded capacities, this is a pure long-term story."

Investors who are well-informed and have surplus cash might consider investing moderate funds for the long term, as this represents a pure long-term investment opportunity, it said.

The IPO will comprise an entirely fresh issue with no offer-for-sale component. The company will use proceeds of the offering for repayment of debt and general corporate purposes.

Retail investors can bid up to Rs 2 lakh in the offering. However, NTPC shareholders can participate in the shareholders' reservation portion, raising their bidding limit to Rs 4 lakh.

The bidding for the Rs 10,000 crore IPO can be made for a minimum lot of 138 shares or in multiples thereof, according to the price band advertisement last week.

India's largest Green Hydrogen hub being built by NTPC Green Energy Ltd. in Pudimadaka in Andhra Pradesh will become available to electrolyser and Green Hydrogen (and its derivatives) manufacturers in the next three years, a senior company official said.

As of 06:58 a.m. on Tuesday, the company's shares were trading at a grey market premium of Rs 0.70, signalling a premium of 0.65% over the upper end of the price band, which has been set at Rs 108. Based on this, the estimated listing price of NTPC Green Energy shares is currently Rs 108.7

Notably, GMP is not an official price quote for the stock and is based on speculation.

Disclaimer: Investments in initial public offerings are subject to market risks. Please consult with financial advisors and read red herring prospectus thoroughly before placing bids.