NTPC Green Energy IPO: Should you invest?

NTPC Green energy is no longer a buzzword; it’s a requirement. With increased pollution and climate change looming, the world is turning to alternative energy solutions. This is where NTPC Green Energy’s initial public offering comes into play.

As India’s emphasis on renewable energy grows, this IPO appears to come at the right time. But the key question is, should you invest?

In this blog, we will look at NTPC Green Energy’s initial public offering to help you decide whether or not to invest.

IPO Highlights at A Glance

Before we get into the details, here’s what you should know about the NTPC Green Energy IPO:

• Total issue size is Rs 10,000 crore. It is the third largest IPO in 2024.
• IPO dates: November 19th, closes November 22nd.
• Price range: Rs 102 to 108 per share.
• Minimum investment is Rs 14,904 (higher price band).
• Employee and shareholder benefits include a Rs 5 discount per share.
• NTPC shareholders have reserved Rs 1,000 crore.

Unlike many IPOs, this one is entirely new, which means that all of the proceeds will go straight into the company’s growth rather than into the pockets of current owners.

Now that we’ve reviewed the foundations of IPOs, let’s have a look at what NTPC Green Energy does.

What Does NTPC Green Energy Do?

NTPC Green Energy is India’s power company’s renewable energy division. It was established in 2022 to combine NTPC’s solar and wind projects into a single business.

Here’s a quick overview of what they bring to the table:

• Ground-based operational capacity exceeds 3,300 MW.
• Future Projects: Contracts for 13,600 MW and 9,175 MW are in the works.
• Revenue Source: Solar and wind energy generate more than 95% of its revenue, with solar accounting for 91%.
• They’re also experimenting with cutting-edge technologies such as hydrogen, green chemicals, and battery storage to help them prepare for the future.

Now, let’s look at why the renewable energy sector is so vital, and how NTPC Green Energy fits into the bigger picture.

Why is the renewable energy sector so important?

The company’s focus on renewable energy could not be more timely. The green energy market is flourishing, and for good reason:

• Solar Power Growth: Annual capacity additions are predicted to quadruple by FY29, from 15 GW to 45–47 GW.
• Wind Power Growth: Annual additions could increase from 3.25 GW to 8-10 GW.
• Investments: Spending on solar energy might quadruple from Rs 1.1 lakh crore in FY24 to Rs 2.3 lakh crore in FY29.

This growth is more than simply numbers; it demonstrates that renewable energy is here to stay. NTPC Green Energy, as part of this ecosystem, is well-positioned to capitalize on this momentum.

Let’s look at some stats to see how NTPC Green Energy has been performing.

How is the financial health of NTPC Green Energy?

A promising sector is fantastic, but how about the company’s financial performance? Let’s discuss numbers:

• Revenue: Rs 2,038 crore in FY24, up 1,094% from FY23.
• Profit : for FY24 was Rs 345 crore, up from Rs 171 crore.
• EBITDA Margin: A solid 89%.
• Debt-to-Equity Ratio: 2.0, suggesting that the company has high debt.
• Here’s where things get interesting: NTPC Green Energy’s development has been spectacular because the company is still very new. However, as it ages, its numbers may become more normal.

How does NTPC Green compare to Adani Green?

To get a fuller idea, consider how NTPC Green Energy compares to one of its primary competitors, Adani Green Energy.

NTPC Green is much smaller than Adani Green, although it is growing faster. However, its high P/E ratio of 260 indicates that it is not cheap.

Aside from the financials, here are several reasons why NTPC Green Energy could be a worthwhile investment.

What’s good about this IPO?

1.Strong parentage

Being endorsed by NTPC provides credibility and access to resources. NTPC’s experience in the energy sector is a significant advantage.

2.Booming Industry

Green energy is more than simply a trend; it is the future. With solar and wind capacity expected to increase, NTPC Green offers long-term growth potential.

3.Fresh Issue Advantage

Because the full Rs 10,000 crore is a new issue, the funds will directly fuel the company’s growth.

4.A clean record :

with less litigation and contingent liabilities is a safer bet.

5.But there are risks too:

Every coin has two sides, and NTPC Green Energy is no different. Let’s look at some of the obstacles and hazards associated with this IPO.

6.Limited track record:

The company is only two years old, therefore its ability to sustain and scale has yet to be shown.

7.High debt levels:

Even though Rs 7,500 crore of the IPO proceeds would be utilized to decrease debt, NTPC Green’s capital-intensive nature means that debt will most certainly stay high.

8.Valuation Concerns:

At a P/E ratio of 260, it’s not cheap. Investors must determine whether the growth potential warrants the price.

Should you invest?

Now it’s time to face reality. Should you take this IPO seriously or not?

Who should think about it?

• Long-Term Investors: If you believe in the future of renewable energy and are comfortable with short-term volatility, this could be a good choice.
• Sustainability enthusiasts: This IPO is a good fit if you want to support green efforts while also making money.

Who should avoid it?

• Conservative investors: This may not be the greatest option if you’re hoping for consistent returns or are concerned about high valuations and debt.
• Short-term traders: The company’s young age and premium valuation may not result in immediate returns.

Conclusion

The NTPC Green Energy Initial Public Offering (IPO) provides an opportunity to participate in India’s renewable energy revolution. It boasts a rich family history, a thriving industry, and a potential pipeline of initiatives. However, its large debt, limited history, and premium value cannot be overlooked.

If you’re willing to take a calculated risk with a long-term view, this IPO may be worth considering. However, if safety and immediate profits are your top goals, you may want to pass on this opportunity.