NTPC Green Energy IPO: Know its peers, business profile, shareholders quota and more

NTPC Green Energy Ltd (NGEL) has filed draft papers for a ₹10,000 crore initial public offering, aiming to benefit from India's growing renewables sector and prevailing positive sentiment in the equity market.

About NTPC Green Energy

NTPC Green Energy (NGEL), a subsidiary of NTPC, was established in April 2022 to lead the company’s transition to renewable energy. Intending to generate 60 GW of power by FY32, NGEL is focusing on projects related to solar energy, green hydrogen, and green ammonia.

India’s renewable energy sector is rapidly growing, supported by government policies and global demand for clean energy. India aims to achieve 500 GW of renewable power capacity by 2030, creating investment opportunities in green energy.

NTPC (Parent entity), which focuses on thermal power, is diversifying into renewable energy to boost revenues. The funds from the IPO will support current and future projects across solar, green hydrogen, and green ammonia.

India’s IPO market is booming. Around 250 companies have raised over ₹91,000 crore (Chittorgarh.com) this year so far, surpassing last year’s total. Conventional energy players are looking for IPOs for their renewable energy units to fund expansion in the fast-growing sector.

NTPC Green Energy IPO

NTPC Green Energy Ltd (NGEL), filed a DRHP with the Securities and Exchange Board of India (SEBI) for a ₹10,000-crore IPO. The public issue, which could become India’s largest in 2024, next to LIC’s ₹21,000 offer, will be a fresh issue of equity shares, with no offer for sale from the promoter entities.

The proceeds from the IPO are expected to fund the company’s ongoing and future projects, which include investments in solar energy, green hydrogen, and green ammonia.

Benefits for existing NTPC shareholders

Through this initial offer, the parent NTPC Ltd aims to unlock substantial value through the listing of its renewable energy business.

The NGEL’s IPO will feature a quota for existing shareholders of parent company NTPC Ltd, with a maximum of 10% of the issue earmarked under this category.

Investors holding shares of NTPC as of the date of filing the red herring prospectus (RHP) will be eligible for this quota. The date of filing the RHP is not known; however, it will be filed soon.

Challenges for NTPC Green

The company derives a significant 87% of its revenue from the top five off-takers in FY24, with its single largest off-taker contributing around 50% of revenue from operations in FY24. The loss of any of these customers or a deterioration of their financial condition could adversely impact the business.

The business and profitability of NGEL depend on the availability and cost of material, equipment, and components of suppliers and the company does not have long-term contracts with suppliers except for components such as solar modules, wind turbine generators and battery energy storage systems. Business operations in Rajasthan

NGEL’s profitability is largely dependent on Power Purchase Agreements (PPAs). This poses risks, as revenue from operations is subject to fixed tariffs, and changes in tariff regulation and structuring.

Peer company performance

NTPC Green Energy has reported ₹1,962.59 crore in revenue in FY24. Its peer reported as given below

India’s renewable energy sector is witnessing robust growth, driven by government initiatives like the National Green Hydrogen Mission and a PLI scheme for high-efficiency solar PV modules. However, with strong competition from traditional and renewable energy companies, along with conventional energy players such as NTPC, ONGC, SJVN, NHPC, and NLC India planning for potential IPOs of renewable energy arms, the sector would remain buzzing.