Mon Nov 18 19:15:24 UTC 2024: ## NTPC Green Energy Launches ₹10,000 Crore IPO, Despite High Valuation

**MUMBAI, INDIA** – NTPC Green Energy Limited (NGEL), a subsidiary of NTPC, is launching its initial public offering (IPO) to raise ₹10,000 crore. The funds will primarily be used to repay debt (₹7,500 crore) and for general corporate purposes. The IPO, which values the company at a potentially expensive 47.5 times EV/Revenue and 259 times PE (based on the upper price band and trailing twelve months ending September 2024 data), has raised concerns about its valuation among analysts.

NGEL, India’s largest renewable energy public sector undertaking (PSU) by operating capacity (3.3 GW as of September 2024), focuses on solar and wind energy projects. It boasts a strong credit rating (AAA) thanks to its parent company and is expanding rapidly both organically and inorganically. The company aims to reach 60 GW of non-fossil capacity by fiscal year 2032. While its strong parentage and management track record justify a premium, the high valuation compared to competitors like Adani Green Energy and ACME Solar remains a significant factor for potential investors.

Despite the high valuation, NGEL benefits from favorable government policies and robust project demand within the renewable energy sector. The company has long-term power purchase agreements (PPAs) covering its existing and under-development projects (13.6 GW total), mitigating revenue risk. However, concentration of revenue from a single off-taker (around 50% in FY24 and H1 FY25) presents a potential concern.

NGEL is also venturing into green hydrogen, with a hub under development in Andhra Pradesh. While the company’s revenue and EBITDA grew significantly in FY24, its net profit declined due to increased finance and depreciation costs.

Analysts advise investors to proceed with caution, suggesting a “wait-and-see” approach given the high valuation. The substantial gain NTPC is expected to realize from its pre-IPO shareholding (around ₹27,250 crore at the upper price band) further highlights the potential market expectations embedded within the IPO pricing.

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