NTPC Ltd’s renewable energy arm, NTPC Green Energy, has filed a draft red herring prospectus (DRHP) with SEBI to launch its much-anticipated Rs 10,000-crore initial public offering (IPO). The public issue, which could become India’s largest in 2024, will be entirely a fresh issue of equity shares, with no offer for sale from the promoter entities.
The IPO will feature a quota for existing shareholders of parent company NTPC Ltd, with a maximum 10 percent 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 to participate in this quota, providing an opportunity for NTPC shareholders to subscribe to the IPO.
NTPC Green Energy growth prospects could prompt NTPC stock rerating
Jefferies has a ‘buy’ rating on NTPC shares with a target price of Rs 485 per share, citing strong growth in its renewable energy business. Jefferies’ target price implies a 17 percent upside from the last closing price of Rs 413.8.
The brokerage said that renewable energy bids have ramped up significantly, with FY24 witnessing awards of 37-39 GW, compared to 8-9 GW YoY. 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, said Jefferies.
The IPO, which comes at a time when thermal power-heavy NTPC is looking for other energy avenues to diversify into and bolster revenues, could attract significant investor interest, said Kranthi Bathini, director of equity strategy at WealthMills Securities. “Considering the fact that green energy will remain in focus in the near-future, investors would definitely want a slice of this pie,” he said.
Significant value unlocking for NTPC from listing renewable energy business
NTPC Green Energy’s management aims to unlock substantial value through the listing. The company’s leadership had previously indicated that the IPO would be launched by the end of 2024, following a detailed plan laid out earlier in May. The Rs 10,000-crore offering will mark the biggest share sale by a PSU since Life Insurance Corporation's Rs 21,000-crore IPO in May 2022.
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.
NTPC Green Energy growth plans
NTPC Green Energy, incorporated in April 2022 to consolidate the parent company’s renewable energy assets, currently has 3.3 GW of installed capacity, with an additional 5.9 GW under construction. The company’s growth pipeline includes 10.8 GW of projects, with bids won and bilateral agreements in place. It has set an ambitious target of expanding its renewable capacity to 60 GW by 2032.
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