ONGC Green Energy IPO or NTPC Green Energy IPO - Which One are You Excited for?

There's always excitement in the market when a new company enters the fray. Initial public offerings or IPOs are marketed as a great way to capitalize on this excitement.

Take Bajaj Housing Finance for example.

Touted as the next HDFC by the investing community, shares of Bajaj Housing Finance made a blockbuster debut on 16 September 2024.

Shares listed at Rs 150 per share, a premium of 114% over its IPO issue price of Rs 70.

Apart from strong fundamentals, what supported this bumper listing was the overwhelming response it received. The Rs 65.6 billion (bn) IPO got subscriptions worth Rs 3.2 trillion!

So, which are some similar IPOs to watch out, that could potentially garner a similar response from investors?

We can think of two such names... ONGC Green Energy and NTPC Green Energy.

Let's take a look at each in detail...

# ONGC Green Energy

ONGC Green Energy is the subsidiary of ONGC.

Oil & Natural Gas Corporation (ONGC), the largest crude oil and natural gas company in India, incorporated this subsidiary on 27 February 2024.

ONGC Green engages in the value-chains of energy business viz. renewable energy, biofuels/ bio-gas business, green hydrogen and its derivatives like green ammonia, green methanol, storage, carbon capture utilisation, and storage and LNG business.

In March 2024, ONGC approved a Rs 990 million (m) equity investment in ONGC Green. The board has also given in-principle approval to invest an additional Rs 11 bn in ONGC Green.

While there have been no official announcements regarding an IPO, the company may consider such plans soon.

In the latest conference call of ONGC, one of the questions that the management received was how ONGC Green plans to tap the space with its massive Rs 1 trillion capex...

To this, the management replied that they're targeting 10 gigawatts of green energy by 2030, and this will comprise of 70% solar, and around 30-40% of wind and hydrogen.

# NTPC Green Energy

NTPC Green Energy is the renewable energy arm of PSU giant NTPC, India's largest power company.

This subsidiary focuses on accelerating NTPC's renewable energy growth and expanding its green footprint across India and potentially overseas.

NTPC Green Energy plans to construct a 60-GW renewable portfolio over the next decade. It plans to develop its non-fossil companies using share sale earnings.

It's also looking to develop pumped hydro storage and green hydrogen and ammonia manufacturing projects. The company is also working on e-mobility and waste-to-wealth projects.

NTPC is preparing to launch the IPO of NTPC Green Energy, possibly in October or November 2024. NTPC Green Energy recently selected investment bankers for the listing.

At a projected issue size of Rs 100 bn, NTPC Green's IPO will be the biggest initial share sale by a public sector company since the Rs 210 bn IPO of Life Insurance Corp. in May 2022.

The IPO proceeds are intended to be used to fund ongoing and future projects across solar, green hydrogen and green ammonia, the company had said.

Recent Developments...

To strengthen its presence in the segment, ONGC Green last week announced a share purchase agreement with PTC India for acquisition of 100% equity stake in PTC Energy.

PTC Energy has an aggregate operational wind generation capacity of 288.80 MW located in Andhra Pradesh, Madhya Pradesh and Karnataka. It operates a total of 157 wind turbine generators (WTGs) across all its wind farms.

In May 2024, it was also reported that ONGC and NTPC Green Energy may come together to form a consortium to bid for Ayana Renewable Power.

Ayana is owned by the National Investment and Infrastructure Fund (NIIF). It boasts a substantial pipeline of over 4 GW of solar, wind, and hybrid power projects across states.

Stock Performance of Parent Companies

Both the parent companies of these IPO bound firms have seen a decent rise in their share prices in the past 1 year.

While NTPC share price has shot up by more than 65% in the past year, ONGC shares are up 56% during the same period.

Here's a table comparing both these companies -

Comparative Analysis

Company	ONGC	NTPC
ROE (%)	18.4	13.9
ROCE (%)	20.4	10.6
Latest EPS (Rs)	35.1	21.2
TTM PE (x)	8.3	18.9
TTM Price to book (x)	1.1	2.3
Dividend yield (%)	4.2	1.9

Data Source: Ace Equity

In Conclusion

Considering the growth of renewable energy sector, the assumption holds true that renewable energy IPOs would generate an even better return than the average IPO.

Green energy as a whole has performed phenomenally, as the performance of the individual stocks shows, but this is largely due to the growth of a few established companies.

IPOs of new companies are not as promising as they seem. Outlier returns do seem to exist in certain categories, but unless you have a crystal ball that lets you predict which of these categories is going to continue doing well, you're better off getting your exposure through an index fund or an ETF or an established company.

Luckily, both these upcoming IPOs are hyped and backed by strong parent companies... so it will be interesting to see the response they get from investors.

As an investor, to increase the possibility of getting an IPO allotment, you could apply to the shareholder's quota as well.

Here, investors purchase one or more shares of the parent companies, so they also qualify to apply in another section of the IPO.

• Upcoming IPO of Hero Fincorp - Parent is Hero MotoCorp
• Upcoming IPO of HDB Financial Services: Parent is HDFC Bank

For more, check out our detailed editorial on 8 parent companies and their upcoming IPOs.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...