The increase in renewable energy is growing with energy demand is set to increase with a growing population. The energy transition from fossil to renewable provides a huge opportunity for energy companies to leverage and move towards sustainability. Here we have NTPC Green Energy which is into renewable energy and the funds are for the company to clear substantial debt on their books.
About NTPC Green Energy IPO
NTPC Green Energy India Limited is set to launch its Initial Public Offering (IPO) which consists of a fresh issue of Rs. 10,000 crore. The IPO is done by companies to raise funds for their various corporate purposes and includes expansion and debt repayment. The offer will be conducted through a book-building process and is scheduled to open on November 19, 2024, and close on November 22, 2024, and is expected to be listed on the bourses dated 27th November 2024. For shareholders, Rs. 1,000 crore is reserved for this Issue.
About NTPC Green Energy GMP
The shares of NTPC Green Energy price in the grey market were trading at 2.78% as of November 13th, 2024. The shares in Grey Market traded at Rs.111. The premium was Rs. 3 on November 13th, 2024.
About NTPC Green Energy (Overview and Business Model)
The company was incorporated in April 2022. NTPC transferred its renewable energy assets including 15 solar/ wind energy units to NTPC Green Energy. It is a wholly owned subsidiary of NTPC Limited which is recognized as India’s largest renewable energy public sector enterprise, with an operational capacity of 3,320 MW from solar projects and 100 MW from wind projects as of September 30, 2024.
They operate across multiple locations in more than six states, which helps mitigate risks associated with location-specific generation variability. The company is focused on developing a portfolio of utility-scale renewable energy projects and supplying power through long-term Power Purchase Agreements (PPAs) with government agencies and public utilities.
As of September 30, 2024, the company’s total portfolio consists of 16,896 MW, including 3,320 MW of operational projects and 13,576 MW of contracted and awarded projects. Additionally, it has 9,175 MW under pipeline development, bringing the total capacity to 26,071 MW. The capacity utilization factor for solar projects is approximately 24.61%, while wind projects have a CUF of around 28.27%.
The company benefits from the support of NTPC Limited, which aims to expand its non-fossil-based capacity to 45-50% of its portfolio by 2032. Renewable energy sales accounted for over 95% of the company’s revenue in recent periods.
NTPC Green Energy Financials
The company in FY23 has recorded its revenue from April 07th, 2022 to 31st March 2023. Their revenue from operations stood at Rs. 1,962.59 crore in FY24, a 1,056% growth from Rs. 169.69 crore in FY23. Net Profits stood at Rs. 344.72 crore in FY24 which is an increase of 101.32% from Rs. 171.22 crore.
The increase in FY23’s net profit higher than its revenue is due to a tax reversal worth Rs. 118.68 crore. The profit before tax suggests a significant 829% increase year on year.
The company as mentioned in the overview and business model earns most of its revenues from renewable energy sales there are only noticeable other expenses which are repairs and maintenance (plant and machinery) which is the highest expense in regard to the operation. The interest cost takes around 35% of the revenue and the depreciation cost takes 32.75% of the revenue. The employee cost slightly increased in comparison to operational revenue year on year.
The return on net worth in FY24 stood at 5.53% which has increased from 3.5% from a year ago. Their debt-to-equity ratio in FY24 stood at 2.05 times and has slightly increased to 2.08 times as of September 2024. They recognize their only segment under the Generation of electricity.
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NTPC Green Energy vs. Peers
In RHP, the Company has listed two companies as its peers which are Adani Green Energy and ReNew Energy Global PLC. The total installed capacity of Adani Green is higher than its peers. In terms of operational revenue NTPC Green stands much higher than Adani Green. For operating EBITDA for NTPC Green – 86% compared to Adani’s – 83.65%.
Strengths of NTPC Green Energy
- Brand Value of NTPC helps the company to take advantage of involvement in long-term agreements with off-takers and suppliers.
- A portfolio of 16,896 MW of solar and wind as of September 2024 is diversified across geographies.
- Growing revenues along with strong credit ratings enable a low cost of capital employed.
- Experienced Management with expertise in renewable energy.
Risks to NTPC Green Energy
- Over 87% of revenue in Fiscal 2024 comes from five major off-takers which indicates reliance on limited customers.
- The top ten suppliers accounted for 92.65% and 77.71% of materials supplied in the last two fiscal periods.
- A significant 62.20% of operational projects are located in Rajasthan which creates geographical dependency and risk.
- Power Purchase Agreements require performance bank guarantees and fluctuate often, which could negatively impact financial results.
NTPC Green Energy Promoter
The promoters of NTPC Green Energy are the President of India, through the Ministry of Power, the Government of India, and NTPC Limited.
NTPC Green Energy Selling Shareholders
There are no selling shareholders in the IPO as this issue involves only fresh issues. The funds raised will be for the company and not for the existing shareholders.
NTPC Green Energy Lead Managers
The lead managers for the IPO are IDBI Capital Markets and Securities Limited, IIFL Capital Services Limited, HDFC Bank Limited, and Nuvama Wealth Management Limited. Kfin Technologies Limited is the Registrar of the offer. They are responsible for managing the entire IPO process which includes pricing, marketing, and ensuring compliance with regulatory requirements.
NTPC Green Energy IPO’s Objectives of Offer
The company is looking to Invest in the wholly owned Subsidiary, NTPC Renewable Energy Limited for repayment/ prepayment in full or in part of certain outstanding borrowings availed by NREL and for General corporate purposes.
written by – Santhosh
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