NTPC Green Energy | IPO Details with Analysis

NTPC Green Energy Limited, a subsidiary of NTPC Limited, is preparing to enter the public markets with its upcoming Initial Public Offering (IPO). As part of NTPC’s commitment to renewable energy, the company plans to raise up to ₹100,000 million (10000 crores) through a fully book-built issue. This IPO is notable not just for its size but also for NTPC’s focus on green energy, aligning with the global shift toward sustainability. However, like any investment, this IPO comes with its own opportunities and risks. Let’s take a closer look at both the positives and the potential drawbacks of this offering.

NTPC Green Energy IPO Details

IPO Open Date: 19 November 2024
Issue Size: INR 10000 Crore
Fresh Issue: INR 10000 Crore
OFS: Nil
Price Band: INR 102-108 Per Share
Expected Listing Gain: 3.24%
Share Holder Quota Criteria: Required an NTPC Ltd. share till 10^th Oct-2024 for eligible for shareholder quota

Utilization of IPO funds by company

Reduction of Debt 75% i.e. INR 7500 crore
Company projects 25% i.e. INR 2500 Crore

Positive sides of the IPO

Owned by Government of India: The biggest strength of NTPC Green Energy Limited it is own by Government Of India. The back support of Government provides investors confidence in the company’s governance, financial strength, and strategic direction.
Focus on Green Energy: The company’s focus is on renewable energy is well for long-term growth. Government of India targets to maximize usage of green energy so this project will become favourable with government policies and incentives.
Large Market Opportunity: As the world focuses on reducing carbon emissions, companies that invest in solar, wind, and other renewable sources are expected to see strong demand.
Experienced Management Team: NTPC Green Energy benefits from a leadership team that has vast experience in the energy sector, because NTPC limited is market leader in energy sector.
Strong Financials: NTPC Green energy is backed with NTPC limited and this company is own by Government and it financials are very strong and this is the biggest and win-win opportunity for Investors.

Negative Aspects of the IPO

Limited Track Record: NTPC Green Energy was incorporated in 2022, meaning it has a relatively short operating history.
Regulatory and Market Risks: The renewable energy sector is highly dependent on government policies and incentives. Any changes in regulations, such as reductions in subsidies for solar and wind projects, could adversely impact the company's financials and growth plans.

NTPC Green Energy Limited's IPO presents a unique opportunity for investors to participate in India's renewable energy grown story. With strong government back support, a clear growth strategy, and the promise of contributing to the country’s green energy transition, the company has significant potential.

For long-term investors who believe in the future of renewable energy and are comfortable with some degree of risk, NTPC Green Energy could be a valuable addition to their portfolio.

Sales and Business Overview

Financial Position Overview

As on the date there is no outstanding litigation involving on Group Companies which may have a material impact on the company.

Balance Sheet Highlights (As of June 30, 2024)

Source of Information: Draft Red Hiring Prospectus of NTPC Green Energy)

Total Assets: ₹287,754.04 million

This indicates robust expansion over the ₹184,313.95 million achieved in March 2023. Increase of 103440.09 million in aggregate.
NTPC Green Energy Limited’s asset base has rapidly increased due to investments in infrastructure projects.

Total Equity: ₹63,708.22 million

An increase from ₹48,874.90 million in March 2023 i.e. 30.35 % increase in 1 year, this showcases the strong performance across its renewable energy portfolio.

Non-Current Liabilities: ₹187,435.73 million

Total non-current liability of the company is ₹187,435.73 million which include borrowings, lease liabilities deferred tax liability and other non-current liabilities last year Non-Current Liabilities was ₹87,088.27. Non-Current liabilities of the company is increasing year to year and it increased 87.25% from last year.

Current Liabilities: ₹36,610.09 million

This figure has slight decrease compared to March 2023. In March 2023 current liabilities was ₹48,350.78 million and in March 2024 it was ₹46,671.17 million (Reduced by 1679.61 million)

Revenue and Profitability Trend

Revenue Growth

· Revenue from Operations: NTPC Green Energy’s total revenue from operations are ₹19,625.98 million for the fiscal year ending March 2024, increased by ₹1,696.90 million from March 2023.

· Other Income: Other income of NTPC Green energy is ₹750.59 million. This non-operating income includes interest earnings, this indicates good financial management and liquidity support.

Profitability

Profit Before Tax (PBT): ₹4,882.00 million

The company has very strong PBT earnings which is ₹4882.00 million on March-2024, which is 872% higher that the last FY i.e. March 2023. Till 30^th June- 2024 company secure an mark of ₹1834 million Profit Before Tax.

Net Profit: ₹3,447.21 million for FY 2024, up from ₹1,712.28 million in 2023, Over 100% increase in net profit of the company over 1 year

Cash Flow Analysis

Net Cash from Operating Activities: ₹15,791.22 million, increased by 130.53% over a year.

Company has healthy cash flow from operations, it means that the company’s main business is bringing good money to funds its growth and daily expenses. It also shows that company managing its costs very well and collecting payments from customers on time. Good cash flow is the key to running company’s day to day activities

Leverage and Financial Stability

Borrowings:

NTPC Green Energy Limited has total borrowings of ₹152,769.80 million as on 30^th June-2024. This look like worrying due to the higher debt, but in this sector of renewable energy, projects required high investment that is the reason of high borrowings and high borrowings are common in renewable energy sector. 75 % of the total money from IPO will be used to reduce debt.

Debt to Equity Ratio:

As of June 2024, the company's debt-to-equity ratio is approximately 2.4. Investors should closely monitor this that how company will maintain its Debt-to-Equity ratio.

Interest Coverage Ratio:

In FY 2024, the company paid ₹6,905.73 million in interest costs. However, company’s operating profit is high enough to cover these interest payments. This is a good indication that the company can handle its debt without any issues right now. After reduction in debt this will automatically decrease.

Growth Prospects

Renewable Energy Portfolio:

NTPC Green Energy Limited has good market share in solar and wind energy, Company is reaching on its installed capacity of 2,925 MG. The company has also grab some good contracts for solar energy, that indicate a strong position in the sector of renewable energy. Positive thinking of Government of India to looking forward for green energy. Govt of India investing good money in green energy projects.

Green Hydrogen Projects:

The company’s ambitions in green hydrogen, developing an integrated green hydrogen hub in Andhra Pradesh and hydrogen-based mobility projects.

Conclusion:

NTPC Green Energy IPO is the best opportunity for the investors who are looking to add futuristic share to the portfolio. This IPO has good fundamental and technical numbers. The company’s robust asset base, growing profitability, and aggressive growth plans in solar, wind, and hydrogen energy indicating a solid future plans.

We are also recommending this IPO for long term investment as well as for sure listing gain. As per my opinion this IPO has potential to give investors up to 200% listing gain. If you but 1 share of NTPC Ltd before 10^th October 2024, you will be eligible for shareholders Quota as well as retail quota. To get sure allotment of IPO we recommend you to read our article to get sure allotment.

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