NTPC Green Energy Long Term IPO Review

NTPC Green energy just came up with it’s IPO and although it priced a little more than what was expected by the public, No substantial GMP indicated that the issue was In fact priced at par not leaving anything for the table for IPO investors and those just seek to sell the shares on listing and get a few listing gains.

So obviously the IPO was unfavourable for short term investors as well as IPO investors, But how is the IPO for long term investors and people who are looking to make this a part of their portfolio.

Let’s have a look:

NTPC Green Energy, just like the recent trends of RE companies is a similar company in the Renewable Energy Space. We have in fact seen quite a few renewable energy IPO’s coming this year and catching on the renewable energy trend in the markets

The notion is generally is that Renewable Energy is the next big thing, Both globally and country wise as well because both globally and domestically, All the Govts and institutions seem to promoting the RE factor and are actively pushing forward in this space, Domestically as well, The space is being explored a lot by our government and they are constantly bringing schemes to aggressively push solar power and renewable energy across all households.

But here is the issue I see with the current sector and the companies

Initially the sector seemed very promising with very promising companies, Now for some reason it has started to feel like companies are just taking the advantage of the hyped sector and the stocks and IPOs are becoming more expensive than what the sector really can afford.

Obviously this isn’t true, But about a couple of years ago, This whole renewable energy trend started as another huge opportunity in the sector with a lot of juice in it and people somehow had less expectations regarding the sector’s performance in the near future. However it feels like things have completely flipped out now.

Now, the companies just somehow seem to be cashing on the trend of higher valuations being given to the entire sector and coming up with higher than expected valuations.

Although not that horrific, but this somewhat reminds us of the Y2K Boom wherein every company was adding ‘infotech’ or IT next to their name just to be relevant and cash out on the higher valuations being given to IT companies.

This has not increased to that extent yet but the simple logic is that in my opinion the risk-return ratio has turned very unfavourable for someone trying to make the most out of this opportunity.

Almost every renewable energy stock is available at 100+ PE and our expectations are obviously a lot regarding the topline and bottomline growth of the company, Now with such high expectations, Either the companies and the management work super hard to remain on that pedestal and provide such growth in the coming quarters which would also justify such kinds of valuations for them.

Or considering a worse case scenario in which they are not able to come up with such numbers in the future, then the fall could be bad as we have already made these stocks reach the heights of valuation considering the possible future growth available in the sector.

So my honest opinion for NTPC as well as any renewable energy stock would be that be cautious while investing and have a very thorough research and only invest if you are very sure of the upcoming growth in the sector as well as the stocks!