NTPC Green Energy Limited IPO: Check IPO Date, Lot Size, Price & Details

Introduction:

NTPC is the largest renewable energy public sector enterprise (excluding hydro) in terms of operating capacity as of June 30, 2024 and power generation in Fiscal 2024.Its renewable energy portfolio encompasses both solar and wind power projects with presence across multiple locations in more than six states which helps mitigate the risk of location-specific generation variability. It is strategically focused on developing a portfolio of utility-scale renewable energy projects, as well as projects for public sector undertakings (“PSUs”) and Indian corporations

For its operational projects, it has entered into long-term Power Purchase Agreements (“PPAs”) or Letters of Award (“LoAs”) with an off-taker that is either a Central government agency like the Solar Energy Corporation of India (“SECI”) or a State government agency or public utility with an average term of 25 years

IPO Details:

Objectives of Issue:

• Investment in the wholly owned Subsidiary, NTPC Renewable Energy Limited (NREL), for repayment/ prepayment, in full or in part of certain outstanding borrowings availed by NREL
  
  
• General corporate purpose

Key Strengths:

• Promoted By NTPC-NTPC Green Energy Limited (NGEL), a subsidiary of NTPC Limited—one of India’s leading power companies with nearly five decades of expertise—stands as a key player in the renewable energy sector. Leveraging NTPC's extensive experience in acquiring land for large-scale power projects and efficiently managing power plant operations, NGEL has established itself among the top 10 renewable energy companies in India in terms of operational capacity, as per a CRISIL report from September 2024.
  The company benefits significantly from the strategic vision, resources, and industry experience of its parent organization, NTPC Group, which aims to increase non-fossil fuel capacity to 45-50% of its portfolio. NTPC’s long history of successful operations reflects its superior execution capabilities, while its deep understanding of working with State DISCOMs further strengthens NGEL's position in the energy sector.
  
  
• Consistent Cash Flows due to contacts with Government Entities -The utility-scale solar and wind energy projects are backed by long-term power purchase agreements (PPAs), primarily established with government-supported entities and public sector organizations, typically spanning a duration of 25 years.
  
  
• Futuristic Approach- Projections suggest that India will require 41.7 GW/208 GWh of battery storage and 18.9 GW of pumped hydro storage by FY 2030. In line with these future demands, efforts are being directed towards advancements in hydrogen, green chemicals, and battery storage technologies. Notable initiatives include establishing a green hydrogen hub in Pudimadaka and partnering on electrolyser manufacturing. In the battery storage segment, plans are underway to deploy grid-scale systems to ensure Firm and Dispatchable Renewable Energy (FDRE) and actively participate in tenders for DISCOMs and grid balancing solutions.

Risks:

• Curtailment orders from Load Dispatch – Load dispatch centers in India were established to maintain an integrated power system across regions, ensuring efficient electricity dispatch, grid monitoring, and providing necessary directives to uphold grid stability. Despite renewable energy's "must-run" status, these centers may occasionally instruct renewable power producers to curtail generation. Such instances, though rare, can arise under exceptional circumstances, such as unexpected demand fluctuations caused by weather anomalies or shifts in macroeconomic conditions. Curtailment may also occur due to grid security concerns, such as transmission congestion stemming from a mismatch between generation capacity and transmission infrastructure.
  
  
• Government Support-The development and profitability of renewable energy projects in the locations in which we operate are dependent on policy and regulatory frameworks that support such developments. Changes in policies could lead to a significant reduction in or a discontinuation of the support for renewable energy projects in such locations. Without such support, renewable energy projects might not be commercially viable in such locations.
  
  
• Concentrated Pool of Utilities and Power Purchase: In most Indian jurisdictions, the transmission and distribution of electricity are predominantly managed by central and state government utility companies, resulting in a concentrated pool of power purchasers for utility-scale solar and wind energy projects. As of June 30, 2024, the company had business relationships with nine offtakers, with one accounting for nearly 50% of total revenue and the top five collectively contributing over 85%. This high dependence on a limited number of offtakers poses a risk to revenue stability, as the loss of any major offtaker could significantly impact the company's financial performance.

Financial Snapshot:

Interest Coverage Ratio – Interest Coverage Ratio determines the ability of a company to fulfill its interest obligations. It is a ratio that compares company earnings (before interest and taxes) to interest expenses. Essentially, it shows how many times a company can pay its interest charges using its operating profit. A higher ICR suggests a company is in a good financial position to handle its debt, while a lower ICR could signal potential financial difficulties. The company’s Interest coverage ratio evolves between 2.5 times to 3 times and it outperforms its industry peers as the industry average is around 1.33 times

Debt to Equity Ratio - The debt-to-equity (D/E) ratio is used to evaluate a company’s financial leverage and is calculated by dividing a company’s total liabilities by its shareholder equity. It is a measure of the degree to which a company is financing its operations with debt rather than its own resources. Since the business is highly debt business company Debt to equity ratio is around 2 times and it is better as compared to the industry average

KPI comparison with Industry Peers

Conclusion:

As a subsidiary of NTPC operating in a high-growth segment, the company demonstrates significant future potential, leveraging NTPC's extensive experience in the sector. A peer comparison of key fundamentals presents a favorable image, with the company outperforming its peers in revenue growth, profit margins, and leverage ratios. However, its capacity utilization factor (CUF), a critical measure of a plant's electricity generation efficiency, is relatively lower for its solar and wind projects compared to competitors. Additionally, an analysis of the company's price-to-earnings (P/E) ratio against its peers indicates overvaluation, raising concerns about its long-term wealth creation prospects. Consequently, investors are advised to avoid the IPO.