The initial public offering (IPO) of NTPC Green Energy, which launched on November 19, 2024, has witnessed a mixed response from investors. On the first day of subscription, the IPO was booked at just 36%, indicating moderate interest in the offering. While the retail investor portion has shown a positive response, with the subscription rate at 1.46 times, other categories like Qualified Institutional Buyers (QIBs) and Non-Institutional Investors (NIIs) have not been as receptive. In fact, the QIB segment recorded zero subscriptions, and the NII category only saw a 0.17 times subscription.
This subscription trend suggests that retail investors, who typically make up a significant portion of IPOs, are more inclined to participate in this offering. The retail portion, despite its relative success, could not compensate for the lack of interest from institutional investors, which is often seen as a key indicator of long-term confidence in an IPO.
NTPC Green Energy's IPO is notable not just for its modest initial response but also for its scale. With an estimated raise of Rs 6,000 crore, it is set to be the third-largest IPO of 2024, following Hyundai Motors India’s Rs 28,756 crore IPO and Swiggy's Rs 11,327 crore public offering. The price band for the NTPC Green Energy IPO has been set between Rs 102 and Rs 108 per share, and retail investors can bid for a minimum of 138 shares, totaling an investment of Rs 14,904.
NTPC Green Energy is a wholly owned subsidiary of NTPC Limited, India's largest public sector company in the power generation sector. The subsidiary is focused on renewable energy generation, primarily solar and wind power, and has established a significant presence in over six states across India. This emphasis on clean and sustainable energy aligns with India's long-term goals of reducing its carbon footprint and transitioning to renewable energy sources, making NTPC Green Energy a key player in this sector.
Despite the underwhelming initial subscription figures, several market analysts have expressed optimism regarding the long-term growth prospects of NTPC Green Energy. Both Swastika Investmart Ltd and Baja Broking have recommended the IPO for long-term investors. They believe the company's strategic positioning, underpinned by NTPC's financial strength and its ambitious renewable energy targets, will allow it to capitalize on the growing demand for green energy solutions in the country.Â
However, potential investors are also advised to proceed with caution due to the steep valuation of the IPO. With a price-to-earnings (P/E) ratio of 264x as of FY 2024, NTPC Green Energy's IPO is priced significantly higher than its peers in the renewable energy space. This aggressive pricing has led analysts to caution that only investors with a high-risk appetite should consider the IPO, as the steep P/E ratio may limit short-term gains and suggest that investors will need to take a long-term view (3-5 years) for potential returns.
The grey market premium (GMP), which provides a glimpse into investor sentiment ahead of the IPO’s listing, has also been on a decline. From a high of Rs 11, the GMP fell to Rs 1.15, reflecting a reduction in speculative interest. This indicates that many investors are less hopeful about the immediate listing gains, and are perhaps focusing more on the company’s future growth prospects rather than short-term price movements.
The final allotment for the NTPC Green Energy IPO is expected to be completed by November 25, 2024, and the stock is slated to be listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) on November 27, 2024. Whether the stock sees a strong debut or experiences tepid trading in the early days will likely hinge on the broader market sentiment and the company’s performance in meeting its renewable energy goals in the years to come.
Overall, while the IPO has not drawn overwhelming enthusiasm from institutional investors, the future of NTPC Green Energy remains tied to India's green energy transition. If the company can effectively scale up its operations and meet the increasing demand for sustainable power, it has the potential to generate significant long-term value for its investors. However, due to the current high valuation and fluctuating sentiment, this IPO may be best suited for those willing to invest with a longer horizon in mind.
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