NTPC Green Energy IPO to open on Tuesday: Why is GMP falling? Check recommendations, price, key dates

Last update:November 18, 2024, 12:01 p.m. IST

NTPC Green Energy IPO: Its gray market or GMP premium remained unchanged at a low Rs 1, just 0.93 percent from the IPO’s upper price band of Rs 108, over the last three days. Should you apply for the IPO? Check the brokerage…Learn more

NTPC Green Energy IPO.

NTPC Green Energy IPO: The NTPC Green Energy IPO, which is an umbrella company for state-owned power giant NTPC’s green business initiatives, is going to open on Tuesday, November 19. Although it is a highly anticipated IPO, the latest GMP trend shows moderate interest from investors.

The Rs 10,000 crore IPO will be launched on November 19 and concluded on November 22. The IPO price band has been set in the range of Rs 102 to Rs 108.

According to market observers, the company’s gray market premium (GMP) remains unchanged at a low Rs 1, which is just 0.93 percent from the IPO’s upper price band of Rs 108, over the last three days. Analysts believe that this low level of GMP signals very low interest from investors, particularly non-institutional investors (NII).

However, GMP has fallen sharply over the past 15 days.

GMP is based on market sentiments and keeps changing. The “gray market premium” indicates that investors are willing to pay more than the issue price.

According to RK of IPO Mantra: “Initially, in September 2024, the price range was expected around Rs 25-30. The GMP was then above 100 percent. In October, news came of a price range of Rs 40 to 50. The demand remained the same. In November, it was learned that the price range could be around Rs 120-125. All the GMPs have disappeared. Finally, the IPO price came to Rs 108. And there is hardly any interest. A perfect example of how high prices can kill any enthusiasm. »

Another market analyst said the drop in GMP is part of the general pessimism towards IPOs after recent subdued listings like the IPO of Hyundai Motor India and Afcons. “This could be due to the overall downward trend in stock markets.”

IPO of NTPC Green Energy: shareholder quota

Shareholders of its parent company NTPC Ltd will get a greater advantage in the much-awaited offer as they have a 10 per cent quota. According to the red herring prospectus (RHP), Rs 1,000 crore of the Rs 10,000 crore IPO will be reserved for NTPC shareholders and any investor holding even one share of NTPC will be eligible to apply in within the framework of the shareholder quota, thus increasing the chances of success. IPO Grant.

According to the RHP, “Shares of face value of Rs 10 each will be allotted to eligible shareholders on a proportionate basis, such reserved share not exceeding 10 per cent of the total issue size.”

NTPC Green Energy IPO Shareholder Quota: Who is Eligible?

Under this, investors holding NTPC shares in their demat account on the date of filing of the RHP – November 13 – will be able to apply for the IPO of NTPC Green Energy under the 10% shareholder quota. .

Shares of NTPC Ltd were trading 2.28 per cent lower at Rs 364 apiece on the BSE on Monday, a day before the IPO of NTPC Green Energy.

NTPC Green Energy IPO: Can you buy NTPC shares now for shareholder quota?

No, the deadline was November 13. So, purchasing NTPC shares now will not make any investor eligible for the NTPC Green Energy IPO shareholder quota.

According to a market watcher: “If you know someone who currently owns NTPC shares, you can ask them to apply for the IPO on your behalf. This is now the only solution for those who do not hold shares.”

NTPC Green Energy IPO: Why did it attract considerable initial interest?

After the recent bumper listings of two green energy companies – Premiere Energies and Waaree Energies, investors now find another opportunity to invest in the IPO of a green energy company, especially when it It is a subsidiary of a public electricity giant in India. However, shares of Premiere Energies and Waaree Energies have faced significant selling pressure in recent days.

NTPC Green Energy IPO: Should You Apply? Analyst Recommendations

Most brokerages gave ‘subscribe long term’ recommendations for IPO.

SBI Securities In its IPO note, it is stated: “NGEL has a broad portfolio of large-scale solar and wind power projects coupled with projects for PSUs and corporate India. The Company and NTPC Group have a strong track record in developing, constructing and operating renewable energy projects, led by experienced in-house management and procurement teams.

At the upper price band of Rs 108, NGEL is valued at a FY24 EV/EBITDA of 53.4x on post-issue capital. The company will increase its operational capacity to 6/11/19 GW by FY25E/FY26E/FY27E respectively, from 3.3 GW as of September 2024. Based on our envelope calculation, within the range higher price, the issue is priced at FY25E/FY26E. /FY27E EV/EBITDA multiple of 35.3x/18.3x/10.1x and EV/MW of Rs 16.8 cr/9.0 cr/5.1 cr respectively. The company has exponential growth potential in the medium term with its revenue/EBITDA/PAT expected to grow at a CAGR of 79.0%/117.2%/123.8% to Rs 11,250 cr/9,563 cr/1,980 cr respectively over the period FY24-27E.

“We recommend investors to subscribe to the issue at the limit price for the long term,” SBI Securities said in the note.

Another brokerage firm, Reliance Securities, has also given a ‘long-term subscription’ rating to the IPO.

He said NGEL benefits from NTPC’s financial strength and long-term relationships with buyers and suppliers, thereby increasing its revenues as well as strong credit ratings which enable low cost of debt for project execution on a large scale. NGEL has deep domain expertise in the management team, focusing on new energy solutions such as green hydrogen, green chemicals and storage with prudent growth and contributing to the achievement of net zero emissions targets of India.

“We believe that with a prudent business model and strong earnings growth accompanied by financial improvements and return ratios, we recommend subscription to the issue for the long term,” Reliance Securities said.

Kranthi Bathini, director of equity strategy at WealthMills Securities, said the IPO comes at a time when NTPC, a major thermal power company, is looking for other energy avenues to diversify and increase revenue.

“Given the fact that green energy will remain the center of attention in the near future, investors will definitely want a piece of this pie,” Bathini added.

NTPC Green Energy IPO: more details

The IPO is entirely a fresh issue of up to Rs 10,000 crore without any element of an offer for sale. A discount of Rs 5 per equity share is offered to eligible employees who bid in the employee reservation portion.

The IPO will remain open between November 19 and 22. The allocation is expected to be finalized on November 25, while the listing will take place on November 27.

The proceeds from its fresh issue will be used to the tune of Rs 7,500 crore to invest in its wholly owned subsidiary, NTPC Renewable Energy Limited (NREL) for repayment/prepayment, in whole or in part of certain outstanding borrowings including NREL benefited. and the general objectives of the company.

NTPC Green Energy is the largest public sector renewable energy company (excluding hydropower) in terms of operating capacity as of September 30, 2024 and power generation in FY 2024, according to a CRISIL report of November 2024 .

As of September 30, 2024, its portfolio consisted of 16,896 MW including 3,320 MW of operating projects and 13,576 MW of contracted and awarded projects. NTPC Green Energy’s operating revenue grew at a CAGR of 46.82%, from Rs 910.42 crore in FY2022 (on a specific basis) to Rs 1,962.60 crore in financial year 2024 (on a restated basis).