State-run NTPC is eyeing the twin benefits of both the parent and green arm hitting new highs in valuation with the proposed listing of the latter.
NTPC Green Energy Ltd (NGEL) filed a draft red herring prospectus (DRHP) on Wednesday with SEBI to launch Rs 10,000 crore initial public offering (IPO). It is likely that the IPO will be followed by an offer for sale at an appropriate time later.
In an interview to FE earlier, NTPC Chairman and Managing Director Gurdeep Singh had said the listing of its wholly owned green subsidiary will increase the valuation of the parent company. “Our balance sheet is very robust and healthy, and we can raise money easily. However, as a stated objective, we will go for 10% (offer) to start with, followed by 15% through OFS (Offer for Sale),” he had said.
Singh also underscored “great potential” in the green energy segment and expressed optimism that NGEL could become “an even bigger company than NTPC Ltd” once listed. He had highlighted that because of the company’s coal business, the green energy business might not have been able to gain full investor confidence.
Jefferies has a ‘buy’ rating on NTPC shares with a target price of Rs 485 per share, owing to strong growth in its renewable energy business.
The brokerage said that renewable energy bids have ramped up significantly, with FY24 witnessing awards of 37-39 GW, compared to 8-9 GW on year. “NTPC is on track to meet its 60 GW renewable energy target by 2032, with 24 GW of the capacity pipeline already in place. The ramp-up in renewable energy capacity and the company’s green hydrogen pilot projects are key drivers for re-rating NTPC stock,” the brokerage said. In the medium term, double-digit EPS CAGR remain re-rating driver, it added.
NGEL public issue will be a fresh issue of equity shares and existing promoter entities will not sell any stake.
The IPO, expected to be the largest PSU share sale since Life Insurance Corporation’s IPO in May 2022, will have a maximum 10% of the issue earmarked for NTPC’s existing shareholders. Investors holding shares of NTPC as of the date of filing of the red herring prospectus will be eligible to participate.
The company has already assigned IDBI Capital Markets and Securities, HDFC Bank, IIFL Securities and Nuvama Wealth Management to manage its IPO which is expected to hit the market in the next two months.
NTPC Ltd has over the years diversified into renewable energy sources including wind, solar, hydro, nuclear energy, and chemicals like ethanol and methanol. Going ahead, the company will be more aggressive in increasing its renewable energy capacity and nuclear energy along with energy storage solutions.
In the DRHP, the company said that it is one of the frontrunners in the development of Round-the-Clock (RTC) renewable energy projects in the country and is developing 2.7 GW of RTC RE capacities, including one of the world’s largest RTC RE projects of 1.3 GW.
“Among its peers, the company has earned higher EBITDA margins and PAT margins in the last two fiscal years. The company has a debt-to-equity ratio of 1.97 for fiscal 2024, which indicates moderate leverage. Further, it is lower than its peers, indicating higher funding through equity,” the company said in the DHRP.
The company said that its business is dependent on the volatility of prices of renewable energy equipment. “Any disruption in supply, or volatility in prices, may adversely impact our business, results of operations, and financial condition,” it said.
NTPC Green Energy’s revenue from operations for the quarter ended June 30, 2024, stood at Rs 578.44 crore. In FY24, the company’s revenue surged to Rs 1,962.60 crore compared to Rs 169.69 crore in FY23, as per the DRHP.
From: financialexpress
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