The Indian initial public offering (IPO) market has witnessed a surge in activity, highlighted by an increasing number of firms seeking to go public. This reflects a growing appetite for capital among Indian businesses and also underlines the increasing participation of both retail and institutional investors in the IPO space. Energy companies too are turning their gaze towards the public issue market with unprecedented enthusiasm. For such companies, an IPO not only offers access to substantial capital but also enables them to scale operations, enhance research and development, and expand their project portfolios. These significant changes align seamlessly with India’s ambitious renewable energy goals, accelerating project deployments and fostering innovation in clean energy technologies.
IPO market boom in India
According to the Reserve Bank of India’s State of the Indian Economy report for September 2024, a growing number of listed companies turned to qualified institutional placements (QIPs) for raising capital, which is estimated to reach Rs 600 billion within the first eight months of 2024. Additionally, the EY IPO Trends Report highlights that India’s IPO landscape has shown impressive growth, positioning the country at the forefront of global IPO activities in the first half of 2024. It reported that India accounted for nearly 27 per cent of the worldwide IPOs during this period. The robust macroeconomic environment, combined with market confidence and supported by a projected GDP growth rate of 7.2 per cent for 2024-25, has enhanced the attractiveness of the IPO market. With benchmark indices Nifty 50 and Sensex 30 trading near their all-time highs and investor sentiment strong, unlisted companies are expediting their IPO filings to access public funding.
One can also argue that another crucial element driving this IPO boom has been the role of the Securities and Exchange Board of India (SEBI), which has enhanced transparency and efficiency in capital markets. By implementing reforms such as simplifying filing requirements, eliminating the 1 per cent security deposit and allowing certain shareholders to contribute to the minimum promoters’ contribution, SEBI has made it significantly easier for companies to access capital.
Case for IPO uptake in the energy sector
There are several factors fostering a positive environment for energy companies taking the IPO route. One, the Indian government has set a long-term trajectory with an ambitious target of achieving 500 GW of installed electricity capacity from non-fossil fuel sources by 2030. To this end, the Union Budget’s allocation for the Ministry of New and Renewable Energy has seen a significant increase to Rs 191 billion, up from Rs 128.5 billion in the interim budget. Two, the government has made remarkable strides in auctioning renewable energy projects, with an impressive 35 GW slated for auction in FY 2024, significantly higher than the average of 14 GW between FY 2021 and FY 2023. The decline in average solar tariff rates has also created a sustainable and viable solar market in India. Three, the production-linked incentive scheme is establishing a robust ecosystem for manufacturing high-efficiency solar photovoltaic modules domestically, thus reducing reliance on imports. The National Green Hydrogen Mission (NGHM) has also gained momentum, supported by a Rs 6 billion allocation in the Union Budget 2024-25, marking a 102 per cent increase from the previous year. These initiatives have improved the risk profile of the renewable energy sector, with median ratings rising from BBB in 2018 to A+ in 2024 for the sector. Therefore, with a record capacity addition of 65 GW over the past five years, this environment has set the stage for increased financing and a burgeoning market. As a result, the renewable energy sector is witnessing a surge in IPOs, paving the way for companies to go public and capitalise on this transformative shift. Building on this momentum, several key players in the energy sector have announced ambitious IPO plans or have successfully gone public, signalling their readiness to capitalise on the favourable market conditions and government support.
The following section provides details on the companies that have gone public in the past year and those that have announced plans to enter the
public market.
Recent IPOs
Over the past year, numerous IPOs have been issued. Premier Energies, which recently launched its IPO, generated remarkable interest. It was oversubscribed 74.38 times. The offering attracted bids for 3,320.2 million equity shares against the 44.6 million shares available, as reported by NSE data. With India’s solar cell exports expected to rise sharply, Premier Energies stands to benefit significantly as the leading exporter of solar cells to the US for FY 2024, contributing over 95 per cent to the country’s total exports. This strategic positioning will likely enhance the company’s market presence and growth trajectory.
The previous issuance by the Indian Renewable Energy Development Agency (IREDA) in November 2023 was a notable success, with an issue price of Rs 32 soaring to a 52-week high of Rs 214. Following this, IREDA plans to further raise approximately Rs 45 billion through a fresh equity issuance, with the government set to dilute its stake by up to 7 per cent via a QIP.
Alpex Solar Limited’s IPO has also sparked significant excitement, achieving an impressive subscription rate of 303 times. The offering, which took place from February 8 to February 12, 2024, sought to raise Rs 745.2 million. Alpex Solar Limited plans to invest Rs 195.5 million to increase its solar module manufacturing capacity from 450 MW to 1,200 MW, and allocate Rs 129.4 million for the establishment of a new aluminium frame manufacturing unit and Rs 204.9 million for working capital, with the remaining funds set aside for corporate expenses.
Further, the month of October saw Danish Power, a seasoned transformer manufacturer, set a new benchmark on the SME platform by launching the largest IPO to date, surpassing the previous record held by KPI Green by offering 52.08 lakh shares within a price band of Rs 360-Rs 380. The IPO saw strong demand, with an impressive 12.01 times oversubscription by the second day.
Upcoming IPOs of PSUs
Government entities such as NTPC Green Energy Limited (NGEL), Oil and Natural Gas Corporation Limited (ONGC) and SJVN Limited are strategically preparing to launch IPOs for their green energy subsidiaries, facilitating the energy transition and securing capital for large-scale projects. ONGC Green Energy is set to unveil its IPO, focusing on innovative initiatives in biofuels, green hydrogen and carbon capture technologies. This endeavour is supported by a recent funding boost of Rs 990 million, with an additional Rs 11 billion pending approval for further expansion. Simultaneously, SJVN is preparing for the IPO of its subsidiary, SJVN Green Energy Limited, with an ambitious goal of developing 25,000 MW of renewable energy capacity by 2030. This initiative will kick off with significant solar and green ammonia projects in collaboration with the Greenko Group and other strategic partners. NLC India Limited aims to list its renewable arm, NLC India Renewables Limited, by the first quarter of the next financial year. NGEL has also filed its draft red herring prospectus (DRHP) for an IPO valued at Rs 100 billion. The IPO, set to be launched by the first week of November 2024, aims to support expansion plans targeting over 60 GW by 2030. A major advantage for NGEL is its AAA credit rating – which allows fundraising at lower interest rates. This is particularly crucial in the renewable energy sector, where projects require substantial capital and often encounter high interest rates that can impact profitability. The anticipated listing of NGEL is expected to unlock considerable value for its parent company, NTPC Limited. The proceeds from the IPO will be allocated to ongoing and future projects, with each equity share having a face value of Rs 10. Solar Energy Corporation of India Limited, having recently received Navratna status, also plans to launch its IPO within the next two years, aiming to expand its renewable energy capacity to 10 GW by 2030, up from its current 122.7 MW.
Upcoming IPOs of private companies
The private sector is also gearing up for significant IPO activity. Waaree Energies stands at the forefront of this trend, having already secured SEBI approval for its IPO. The offering includes fresh equity shares worth Rs 30 billion and an offer for sale of 3.2 million equity shares at a face value of Rs 10 each. The proceeds from the IPO will fund the establishment of a 6 GW manufacturing facility for ingots, wafers, solar cells and PV modules in Odisha, alongside general corporate purposes. In the small and medium enterprises IPO segment, Solarium Green Energy submitted its DRHP to the BSE. The company intends to offer up to 5.5 million equity shares, although it is yet to disclose the total issue size. Similarly, ACME Solar Holdings has filed a DRHP with SEBI to raise Rs 30 billion through its IPO. This offering consists of a
Rs 10 billion offer for sale from its parent company, ACME Cleantech Solutions, and a Rs 20 billion fresh issue of shares. Further, the government promotes green hydrogen through initiatives such as the NGHM. This has prompted companies focused on this sector to prepare for IPOs in 2025. Matrix Gas & Renewables, for instance, plans to raise up to Rs 12 billion for the development of 1,000 MW of capacity over the next three years, with a total capital expenditure of Rs 35 billion.
In addition to the surge in IPOs among renewable energy companies, several power sector companies have announced IPOs. Integrum Energy Infrastructure has filed a DRHP for an IPO comprising a fresh issue of up to 4.95 million equity shares and an offer for sale of up to 0.54 million shares. The company intends to direct the funds towards developing a new solar power plant and meeting working capital needs. Similarly, Rajesh Power Services Limited is set to raise funds through its BSE SME listing, with part of the proceeds allocated to renewable energy projects, including a 1,300 kW solar plant and green hydrogen initiatives.
Conclusion
The surge of IPOs in India’s energy sector marks a transformative phase for both the market and the environment. As India’s peak power demand is projected to reach 270 GW next fiscal year and soar to 446 GW by 2035, according to the Central Electricity Authority, the government is actively increasing generation capacity to meet this growing need. Renewable energy and power companies, bolstered by robust government support and enhanced investor sentiment, are poised to leverage public funding for expansion and innovation. This convergence of factors not only aligns with India’s ambitious renewable energy goals but will also foster a sustainable future, presenting significant opportunities for investors and stakeholders in the sector.