NTPC Green Energy GMP drops ahead of Nov 18 IPO

The grey market premium (GMP) of NTPC Green Energy, the renewable energy arm of state-owned NTPC, has plunged sharply in recent days ahead of the opening of the initial public offering (IPO) early next week. Shares of NTPC Green Energy were commanding a GMP of ₹9 in the unlisted market today, dropping from ₹25 on November 9. The PSU entity is expected to announce the price band for the IPO on November 13, while the issue is set to open for subscription on November 18.

GMP, a key indicator of how an IPO may perform on listing, indicates investors' willingness to pay more for a public issue. However, it is subject to market dynamics and changes very quickly.

The reason behind sharp decline in NTPC Green Energy GMP can be attributed to lukewarm responses to recent big IPOs of Hyundai Motor India, Swiggy, Afcons Infrastructure, ACME Solar Holdings, and Sagility India. All these issues sailed through on the last day of the bidding process amid subdued demand and volatility in the equity market.  This may be because of investors struggling to get breathing space amid back-to-back IPOs. As of October 2024, 68 companies have already gone public, raising more than ₹1 lakh crore, and are on the verge to break all previous records.

NTPC Green looks to raise ₹10,000 cr

NTPC Green Energy, which had filed its IPO papers with the SEBI on September 18, 2024,  recently received final observation from the capital markets regulator to raise ₹10,000 crore via IPO route. The issue, which is completely a fresh issue of equity shares, is touted to be the biggest IPO by a PSU since Life Insurance Corporation's ₹21,000-crore share sale in May 2022.

Formed in 2022 as a subsidiary of NTPC, NTPC Green Energy is a 'Maharatna' central public sector enterprise. In 2023, NTPC transferred its stake in NTPC Renewable Energy (created in 2020) to NTPC Green Energy.

The company intends to use IPO proceeds to invest in its wholly owned subsidiary, NTPC Renewable Energy, to repay its certain debts. A part of the fund will be used to meet general corporate purposes. 

As per the DRHP, the company will use 75% of the raised capital (₹7,500 crore) to clear debts availed by NTPC Renewable Energy Limited (NREL). As per the IPO document, NREL has entered into various borrowing arrangements, including borrowings in the form of term loans and various fund-based and non-fund based working capital facilities. As on July 31, 2024, the company had outstanding borrowings (fund based) of ₹16,235 crore on a consolidated basis.

NTPC Green Energy is the largest renewable energy public sector enterprise (excluding hydro) in terms of operating capacity as of June 30, 2024 and power generation in fiscal 2024, as per CRISIL report cited in the DRHP. The operational capacity was 3,071 MW of solar projects and 100 MW of wind projects with presence in more than six states.

As of June 30, 2024, the company’s portfolio consisted of 14,696 MWs, including 2,925 MWs of operating projects and 11,771 MWs of contracted and awarded projects. It had 15 offtakers, including government agencies and public utilities, across 37 solar projects and 9 wind projects.

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