NTPC Green Energy surges 12% on market debut; what should investors do now?

Beating street expectations, NTPC Green Energy Ltd (NGEL) shares rallied up to 14% on its first day of trading on the domestic bourses. The rally in the PSU stock was attributed to strong investor sentiment toward the renewable energy sector as well as improved market conditions.

Early today, NTPC Green shares listed at ₹111.5 on the NSE, a premium of 3.2% over the initial public offering (IPO) price of ₹108 apiece. Post-listing, the renewable energy stock gained 13.65% to hit an intraday high of ₹122.75, before settling at ₹122.10, up 13.06% over the issue price. Driven by the strong rally, the market capitalisation of the renewable energy arm of NTPC increased by around ₹11,000 crore to ₹1.02 lakh crore, at the end of first day of trading.

The debut of NGEL shares on the domestic bourses was broadly in line with expectations as the stock was commanding a grey market premium (GMP) of ₹1 ahead of its listing, indicating a positive-to-flat opening on the domestic bourses.

The listing was subdued as the ₹10,000-crore IPO of NGEL, the biggest-ever in terms of fresh issue size, received tepid response from investors, with the issue managing to sail through on the final day of bidding with 2.55 times booking. The issue was subscribed 3.59 times in the retail category and 3.51 times in the qualified institutional buyers (QIB) segment. The non-institutional Institutional Investors (NII) segment failed to get fully subscribed as it received 0.85 times bids. The company had reserved 75% of the issue for QIB, 15% for NII, and remaining 10% for retail investors.

What should investors do now?

Post-listing, much of the discussion is around the valuations of NGEL, which is nearly twice that of Adani Green Energy. The price-to-earnings (PE) ratio, an indicator of whether a stock at its current market price is expensive or cheap, of NTPC Green Energy is 299, which is more than double of Adani Green’s PE ratio of 126.

However, the company’s prospects in the renewable energy space make it a suitable option for long term investors, say analysts.

“Despite the aggressive pricing based on the PE ratio, the company's long-term prospects in the renewable energy space make it a suitable option for patient investors with a long-term horizon and we recommend to 'HOLD' it with a stop loss at around ₹110,” says Shivani Nyati, Head of Wealth at Swastika Investmart.

Nyati adds that the post-listing rally was driven by strong investor sentiment toward the renewable energy sector. “Its robust and diversified portfolio, consistent revenue growth, and strategic importance as an NTPC subsidiary have led to a positive market revaluation. Improved market conditions, optimism around India’s renewable energy ambitions, and institutional investor confidence are further fueling this rally.”

Prashanth Tapse, Senior VP (Research), Mehta Equities, recommended allotted investors to ‘HOLD’ the stock for long term. He opines that the counter may see short term volatility. For non-allotted investors, he advised to “accumulate” if the listing is around the issue price or even below.

“As expected NTPC Green Energy listing was in line with flat debut. Valuations and subdued market mood justifies the listing. For long term investors, we believe NTPC Green Energy Ltd is a great opportunity to invest in a leading player of India’s renewable energy sector, backed by the formidable resources and expertise of NTPC Ltd as a Long term strategy only,” says Prashanth Tapse, Senior VP (Research), Mehta Equities.

“With ambitious renewable energy targets, the company is well-equipped to capitalise on the increasing demand for sustainable energy solutions. NTPC Green's strategic expansion into green hydrogen, green chemicals and battery storage further enhances its growth prospects, positioning it at the forefront of India’s energy transition,” he adds.

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