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NTPC Green Energy Ltd. (NGEL), a wholly owned subsidiary of NTPC, is planning an IPO to raise up to INR 10,000 Crs. As of FY24, NGEL's operational capacity stands at 3.3 GW, with a target to expand to approximately 19 GW by FY27 and 60 GW by 2032. The company's renewable portfolio includes both solar and wind power assets spread across multiple locations in over six states. As of September 2024, NTPC Green's operational capacity reached 3,220 MW in solar projects and 100 MW in wind projects across six states, with an average Power Purchase Agreement (PPA) duration of 25 years. Additionally, as of September 2024, it has 13,576 MW of contracted and awarded projects, with a further 9,175 MW in the pipeline.

Investment Rationale :

Strategic Access to Low-Cost Financing:

NGEL maintains high capacity utilization, operational efficiency, and low operating costs, benefiting from its strong parent company and diversified portfolio. NTPC's high credit rating and robust balance sheet provide NGEL with access to low-cost capital, helping the company maintain healthy coverage ratios.

Clear Capacity Visibility of 60 GW+:

NTPC Green Energy Ltd. (NGEL) has visibility for over 60 GW in renewable capacity. As of FY24, its operational capacity is 3.3 GW and currently has 11.8 GW of capacity under construction (contracted and equipment awarded) and an additional 11 GW in the pipeline at the MoU stage. Recently, NGEL signed MoUs with the Rajasthan government for 25 GW of renewable energy capacity and with Mahapreit (a Maharashtra government entity) for 10 GW, bringing its total capacity visibility to over 60 GW, targeted for phased commissioning by FY32.

Investments in Green Hydrogen and Battery Storage:

NGEL is actively exploring growth in green hydrogen and battery storage. It is establishing a green hydrogen hub at Pudimadaka, Andhra Pradesh, and is finalizing partnerships for electrolyzer production. Additionally, NGEL plans to build a grid-scale battery storage facility to support solar and wind power integration, while also participating in grid-scale battery storage tenders for grid balancing. The company has leased 1,200 acres of land at Pudimadaka and has made a capital advance of INR 7 billion, although detailed capex plans are still under development.

Valuation and View:

At the upper price band of Rs 108, NGEL is valued at FY24 EV/ EBITDA of 53.4x on post issue capital. The company will increase its operational capacity to approximately 19 GW by FY27 and 60 GW by 2032 from 3.3 GW as of Sep'24. The company has exponential growth potential in medium term over FY24 to FY27 period. We recommend to SUBSCRIBE to the issue for long term.

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