NTPC Green Energy IPO: Arete Securities recommends subscribing to NGEL IPO for long-term

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NTPC Green Energy Ltd. (NGEL), the renewable energy arm of NTPC, has launched its initial public offering (IPO) to raise ₹10,000 crore. The issue — subscribed 33 per cent so far — concludes on November 22, 2024

Arete Securities has recommended a ‘subscribe’ to the IPO, citing the company’s strong capacity expansion plans and strategic access to low-cost financing. According to Arete, the company’s robust support from its parent entity, NTPC, ensures financial stability and operational efficiency, making it a favorable investment for the long term.

As of FY24, NGEL operates 3.3 GW of renewable energy capacity, comprising solar and wind power projects spread across six Indian states. It has ambitious plans to expand its capacity to 19 GW by FY27 and further to 60 GW by FY32. NGEL’s portfolio includes 13.5 GW of contracted and awarded projects and an additional 9.1 GW in the pipeline.

NGEL is actively exploring growth in green hydrogen and battery storage. It is establishing a green hydrogen hub at Pudimadaka, Andhra Pradesh, and is finalising partnerships for electrolyzer production. Additionally, NGEL plans to build a grid-scale battery storage facility to support solar and wind power integration, while also participating in grid-scale battery storage tenders for grid balancing. 

The IPO comprises a fresh issue of shares, with 75% reserved for qualified institutional buyers, 15% for non-institutional investors, and 10% for retail investors. Employee and shareholder reservations amount to INR 200 crore and INR 1,000 crore, respectively. Post-issue, NTPC will retain an 89% promoter shareholding.

Valuation metrics indicate that at the upper price band of ₹108, NGEL is valued at FY24 EV/ EBITDA of 53.4x on post issue capital.

Arete Securities noted that the company’s financial performance is underpinned by long-term power purchase agreements averaging 25 years. Additionally, its focus on clean energy aligns with India’s decarbonisation goals, presenting a significant growth opportunity in the renewable energy sector.

Investors are advised to consider NGEL’s long-term prospects, supported by NTPC’s financial strength and the company’s roadmap for capacity expansion and technological investments.

(This article was generated using AI and was reviewed by a journalist)