NTPC Green Energy IPO: Can It supercharge NTPC's stock growth?

NTPC's performance in the last two years has largely been driven by its growing renewable energy (RE) business, which is expected to go public in the first half of FY2025.

In Short

• Investors may prefer direct exposure to NTPC Green Energy
• NTPC targets 60 GW renewable capacity by FY32
• ICICI Securities projects Rs 11,700 crore revenue for NTPC Green

NTPC Green Energy, a subsidiary of NTPC Ltd, has recently filed draft papers with the Securities and Exchange Board of India (Sebi) for an initial public offering (IPO) worth Rs 10,000 crore.

NTPC's performance in the last two years has largely been driven by its growing renewable energy (RE) business, which is expected to go public in the first half of FY2025, according to a note by Motilal Oswal Financial Services (MOFSL).

MOFSL values NTPC’s RE business at Rs 88,000 crore but suggests that much of the upside for NTPC may already be factored into its current stock price.

The firm also highlighted the potential impact of a holding company discount post-listing, as investors might prefer direct exposure to NTPC Green Energy over NTPC for renewable energy investments.

While MOFSL remains cautiously optimistic about NTPC's thermal power operations, it noted that the stock is currently trading at 1.6 times FY27 estimated price-to-book (PB) value, which it considers reasonable but not cheap.

NTPC’s FY27 dividend yield of 2.6% is also less attractive compared to Power Grid's 3.5%. MOFSL has set a price target of Rs 450, indicating a potential upside of around 10%.

Earlier this week, ICICI Securities reaffirmed its 'Buy' rating on NTPC with a target price of Rs 495.

The brokerage highlighted robust power demand in India, which is expected to grow at 6% annually for both base and peak power over the next few years.

To meet this demand, ICICI Securities believes additional thermal capacity may be required in the medium term until storage solutions become more economically viable.

On NTPC Green Energy, ICICI Securities noted that the company is not only focused on utility-scale RE projects but is also collaborating with corporates and PSUs for captive renewable energy solutions.

The firm expects higher returns from captive projects compared to utility-scale ones. NTPC has set an ambitious goal of reaching 60 GW of renewable energy capacity by FY32.

ICICI Securities projects NTPC Green Energy will generate revenues of Rs 11,700 crore, with EBITDA in the range of Rs 9,500-10,000 crore for its portfolio.

Currently, NTPC Green Energy has an operational capacity of 3.2 GW, with an additional 12 GW under construction and a future development pipeline of 11 GW.\

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