Exclusive: NTPC Green Management On IPO, Debt, Expansion Plans, Renewable Energy Space And Valuation

The IPO that everybody has been talking about for so long has finally opened for subscription. I'm talking about the NTPC Green IPO, open today. The issue is an entirely fresh issue of 10,000 crore rupees, making it the third-largest IPO this year. It will be open until November 22nd, so you have time to subscribe. It's already raised about 3,960 crore rupees from anchor investors on day one. The retail portion has already sailed through, and overall subscription stands at about 27%. NTPC Green is a leading player in India's renewable energy sector, backed by NTPC. It contributes nearly 17% of India's total installed capacity and 24% of total power generation. To discuss the IPO, the vision going forward, and the journey so far, we're joined by the top management. Let's welcome Mr. J.P. Singh, CMD of NTPC Green Energy, and Mr. Jaikumar Srinivasan, Director of Finance of NTPC Green Energy. Warm welcome to both of you. Congratulations on kickstarting this D-Street journey. Let me start with you, Mr. Singh. Tell us about the journey so far for NTPC Green. NTPC is a marquee power player that D-Street investors have tracked for decades. But NTPC Green is a newer entity. How does one differentiate between the two? Even NTPC shareholders will get a higher chance of allocation in this IPO, so they'll want to know what else NTPC Green will offer.

Thank you. Just as you mentioned, everybody thinks of power and NTPC's name instantly comes to mind. Similarly, going forward, think of green power and NTPC Green's name will come to mind. That's our endeavor. NTPC started the solar journey and signed power purchase agreements for renewable energy way back 10 years ago. Over time, we developed a lot of core competency. NTPC Green Energy was formed in 2022, and assets were transferred to it. In 2022, capacity was hardly around 1,450 megawatts. Today we have 3,300 megawatts. Work is ongoing in projects totaling around 11,000 to 16,000 megawatts. By March 2025, we'll have 6,000 megawatts. By next March, 11,000 megawatts, and by March 2027, 19,000 megawatts. In addition to solar and wind, we've started working on storage solutions. We've called for 1,500 megawatt-hours of battery storage, and we're working on green molecules. We're working in all directions. NTPC Green will march on similar lines to NTPC. As you said, with 17% of installed capacity, we supply 25% of power. Similarly, NTPC Green Energy, with its parental linkage, will be far better positioned than any other company in the country.

Okay. Mr. Srinivasan, how are you going to use the proceeds? It's a 10,000 crore rupee fresh issue. In your DRHP, a sizable portion goes to the wholly-owned subsidiary NTPC Renewable Energy, some for debt repayment, and the rest for general corporate purposes. Could you break it up and tell us out of the 10,000 crore, which goes where?

Okay. So from that 17,000 crore, after debt repayment, how much will still remain on the books?

Okay. And the debt-to-equity ratio? Right now it's at 2.2. How are you looking to scale that down?

Got that. For the renewable energy business, how much will be used? Can we say around 7,000 crore rupees?

Got it. Mr. Singh, you talked about expansion plans, expecting around 19,000 megawatts by FY27. How long will the current proceeds be sufficient for your capacity expansion? By how many years will you be comfortable with this fund raise, and how soon will you have to return to the Street?

By March 2027, we'll be at 19,000 megawatts commissioned. We're also investing in development of new capacities. We've already infused equity of 7,500 crore, and with retained earnings, that's around 2,281 crore. So with the 10,000 crore, we'll be comfortable reaching 19,000 megawatts. For 19,000 megawatts, the total investment requirement is about 7 lakh crore. We're planning a debt-equity ratio of 4:1. This is only an interim step so resources are available. Our growth plans are much higher and we'll need a lot of capital. Our ability to raise debt at competitive rates is far better than many others. We have a AAA domestic rating and our international rating is at par with the sovereign rating. So we can raise debt at very competitive rates, which is one of our differentiators. We also invest in large-sized projects. These two things together make us a much more valuable company.

Right. Mr. Singh, you're big on solar and wind, now going to battery storage and green molecules. Segment-wise, what's the contribution from solar and wind right now into your overall top line? Going forward, how will the segment revenue be spread across?

For the 19,000 megawatts by March 2027, there will be approximately 3,000 megawatts from wind and 16,000 from solar. Going forward, we envisage almost 90% in solar and 10% in wind. Along with solar, there's enough potential for storage capacity, requiring appreciable investment. In about three to four years, we'll start investing in green molecules too. We're developing our hydrogen hub, have acquired the land, and developmental work is underway.

So, this land purchase, is it also in Rajasthan since most of your projects are there?

This green hydrogen hub is near Visakhapatnam, at a place called Pimpa. It's 1,200 acres, a coastal location.

Okay, so this gives you a geographical edge, with the concentration in Rajasthan and now expansion down south. Understood. Mr. Srinivasan, could you help us with your margins? Where are they currently? What's the outlook? What band on margins could you expect, especially with expansion plans till FY27? How do we see margins growing over the next three years?

Okay. Mr. Singh, your growth projections show substantial growth on both top and bottom line. On a three-year CAGR basis, PAT CAGR has been upwards of 90% from FY22 to FY24, and revenue CAGR upwards of 47%. Will this be sustainable given the expansions ahead? What's the realistic expectation for FY25?

This is around 87 to 90%, and there's no reason it should become worse rather than better, because of economies of scale. All our investment decisions are made only after thorough analysis. So you can assume a similar trajectory going forward, up to 2032, which is likely to be achieved by 2030 itself, reaching around 60 GW. There will be good revenue and cash flow, and we'll grow at a similar trajectory.

Wonderful. Mr. Srinivasan, how about your relationships with off-takers and suppliers? I understand there's a longstanding relationship, upwards of 10 and even 20-25 years with some partners. How does it stand now? Are any partnerships ending soon? How are you looking to increase the number of clients?

Could you give us the post-IPO shareholding pattern? How much will NTPC continue to hold, and what's the public float?

Mr. Singh, last couple of questions. Some brokerage houses have raised concerns about aggressive valuations putting you ahead of competition. What would you convey to investors and viewers on the valuation front? Also on competition, many private players are now talking about renewable energy in a big way. You've been in this space a long time with that edge, but how is the competitive scenario developing?

Let me address competition first. We are only in power generation. Different business houses take up opportunities as they come. We've been in the power sector and will remain in the power and energy sector. That's our core competency. Our team has expertise in design, engineering, inspection, construction, operation, and commercial aspects. We even give consultancy to others. We're not afraid of any competition. Our CUF for recently commissioned projects has reached 29 to 30%, compared to 22-23% previously, and on average it used to be 24-25%. That's because of our team's competency, strong rating, and the parent's balance sheet. But the country needs large capacity, and there should be space for everyone. Our 60 GW plan should be achievable by 2030 itself rather than 2032. We're looking at storage systems, both battery and pumped storage, for off-solar hours. We're also working on green molecules like green methanol and sustainable aviation fuel. We've experimented with green hydrogen, running two hydrogen-fueled buses in Leh for decarbonization. At Vindhyachal, we've commissioned a 10-ton-per-day green methanol plant capturing CO2 from the stack. Our hydrogen hub will provide excellent opportunities, and we're in discussions with marine and aviation players.

And the valuation part, sir?

On the valuation side, we've been discussing this with stakeholders. We had a meeting with more than 100 institutions, and the numbers that came out, we've actually given some relaxation to incentivize early investors so they can participate in this growth going forward.

Wonderful. Speaking to both of you, thank you so much, Mr. Srinivasan, for being with us. All the very best for the IPO and the listing journey. We'll see you around at the quarterly results. Looking forward to more interactions with both of you. Thank you so much.