NTPC Green Energy Ltd. (Subscribe)

Highlights

NTPC Green Energy Limited (NGEL) incorporate on 2002 and subsidiary of NTPC Limited, is a largest renewable energy public sector enterprise (excluding hydro) in terms of operating capacity as of Q2FY25 and power generation in FY24.

Their renewable energy portfolio encompasses both solar and wind power assets with presence across multiple locations in more than six states which helps mitigate the risk of location-specific generation variability. As on now they have operational capacity was 3,220 MW of solar projects and 100 MW of wind projects across 6 states.

NGEL is strategically focused on developing a portfolio of utility-scale renewable energy projects, as well as projects for public sector undertakings (PSUs) and Indian corporates. Their projects generate renewable power and feed that power into the grid, supplying a utility or offtaker with energy.

NGEL are considered a partner of choice by many PSUs for fulfillment of their renewable energy development goals. They have signed joint venture agreements to produce renewable power with Rajasthan Rajya Vidyut Utpadan Nigam Limited (RRVUNL), Mahatma Phule Renewable Energy & Infrastructure Technology Limited (MAHAPRET), Damodar Valley Corporation (DVC) and 2 other PSUs and have signed MOUs or term sheets with other private corporates.

Out of the total proceeds of Rs. 100,000 mn, Rs. 75,000 mn would go towards investment in their wholly owned subsidiary, NTPC Renewable Energy Limited (NREL) for repayment/ prepayment, in full or in part of certain outstanding borrowings availed by NREL, Rs. 25,000 would go towards general corporate purpose.

Key Highlights

• India’s installed generation capacity, which stood at 356 GW at the end of FY19 has reached 442 GW as of FY24 and ~451 GW in Fiscal 2025 (till August). By FY29, RE capacity (excl. large hydro) of over 320 GW is expected, driven by various government initiatives, favourable policies, competitive tariffs, innovative tenders, development of solar parks and green energy corridors, etc. RE capacity is estimated to account for about 50 pct of the installed capacity of 660 to 670 GW by FY29.
• As of Q2FY25, NGEL Portfolio consisted of 16,896 MWs including 3,320 MWs operating projects and 13,576 MWs projects contracted and awarded and their capacity under pipeline consisted of 9,175 MWs. Together their portfolio and capacity under pipeline, as consisted of 26,071 MWs. However, the company aims to reach 60 GW capacity by 2030-2032.
• NGEL is investing in hydrogen, green chemical and battery storage capabilities and solutions as well as associated technologies. In the area of battery storage, the company intend to install the Grid scale battery storage as part of Firm and Dispatchable Renewable Energy (FDRE)/Round-the Clock (RTC) projects to complement the solar and wind power in addition to participate in standalone Grid scale battery energy storage system service tenders in the market for various DISCOMS or Grid balancing.
• NGEL believe that they, along with the NTPC Group, have strong inhouse experience in renewable energy project execution and procurement. In solar projects, they usually take responsibility for procurement of major equipment and supplies and the contractor builds, commissions and hands over the solar plant. NGEL also use the turnkey EPC contract model based on specific project conditions. In wind projects, they generally use the turnkey EPC model, entering into contracts with OEMs for manufacturing, installing, and commissioning wind turbines and the balance of plant.
• NTPC Key growth strategies includes (i) Continue to grow project pipeline through prudent bidding and strategic JVs with PSUs and private corporates (ii) Focus on projects in new energy solutions like green hydrogen, green chemicals and storage (iii) Drive efficiency and cost reductions in project execution and operating & maintenance (iv) Continue to contribute to India’s sustainability efforts.
• Sales of the company has grown by 1057 pct YoY in FY24 and it stood at Rs. 19,626 mn. While EBITDA of the company jumped by 1054 pct YoY to Rs. 17,465 mn and EBITDA margin contracted by 22 bps to 88.99 pct in FY24. During FY24, the company reported profit of Rs. 3,447 mn, which grew 101 pct YoY. In H1FY25 sales and EBITDA of the company increased by 7.34 pct YoY and 1.85 pct YoY while profit tumbled by 15.79 pct.

Key Risk

• NGEL business is seasonal and their operating results may fluctuate from period to period, which could make their future performance difficult to predict and could cause operating results for a particular period to fall below expectations.
• The generation of electricity from solar and wind sources depends heavily on suitable meteorological and climate conditions. Unfavourable weather conditions could have a significant impact on NGEL business.

Financial Performance

Peer Comparison Based on FY24

Valuation

NGEL is an umbrella company for the green business initiatives of NTPC and undertakes projects through organic and inorganic routes and aims to be the flag-bearer of NTPC’s green energy journey to achieve the ambitious target of 60 GW by 2032. This target is aligned with India’s renewable energy target of achieving 500 GW from non-fossil sources by 2030. At the upper end of the price of Rs. 108, the issue quotes at EV/EBITDA of ~54.4x based on FY24 post issue capital and PE of 259.6x on FY25E annualized earnings. The issue looks fully priced. Only long-term investors can Subscribe this issue.

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