Green energy ventures are set to benefit from the buoyancy of the primary market as public sector enterprises prepare to divest their operations and list them on stock exchanges. This strategic move will allow these companies to access more affordable funding from global markets.
Notable public sector undertakings (PSUs) such as Coal India, ONGC, SJVN, NHPC, Indian Oil, and NLC India have already established new companies to spearhead their green energy initiatives, benefiting from the tax incentives recently introduced by the government.
For instance, NTPC Green has recently submitted documentation to the Securities and Exchange Board of India (SEBI) for a substantial initial public offering (IPO) valued at ₹10,000 crore, bolstered by its significant solar energy assets. Other public sector green energy initiatives are expected to pursue similar funding through IPOs, as per insider reports.
SJVN, in particular, plans to allocate a considerable ₹12,000 crore towards capital expenditure this fiscal year, primarily focusing on renewable energy projects via its subsidiary, SJVN Green Energy. This subsidiary aims to achieve a remarkable capacity of 25,000 megawatts (MW) by 2030, with a long-term goal of reaching 50,000 MW by 2040.
Moreover, Coal India has taken steps to establish two new subsidiaries—CIL Navi Karniya Urja and CIL Solar PV—dedicated to advancing solar photovoltaic technologies. The company intends to add 5 gigawatts (GW) of renewable energy capacity by 2028, ahead of its initial timeline.
The Indian government has set an ambitious goal of attaining an installed renewable energy capacity of 500 GW by the year 2030. As of May 26, 2023, coal and lignite Central Public Sector Enterprises (CPSEs) have achieved installed solar capacity of approximately 1,656 MW, alongside 51 MW from wind energy.
Vishnu Kant Upadhyay, Assistant Vice President of Research & Advisory at Master Capital Services, noted that investors stand to gain numerous benefits from these spin-offs and subsequent listings. Typically, IPOs include a reservation for existing shareholders of the parent company, allowing them to invest up to a specified amount.
These newly spun-off subsidiaries are often perceived as lower-risk investments due to their association with established parent companies, which provide financial stability, extensive resources, and market expertise. Santosh Meena, Head of Research at Swastika Investmart, emphasized that the listing of subsidiaries frequently leads to the unlocking of significant value.
This is primarily because the subsidiary can concentrate entirely on its specialized operations, while the parent company can focus on its core business functions without the distraction of ancillary operations. As an independent entity, the newly established subsidiary gains the flexibility to raise capital through various channels, including IPOs, debt financing, and other funding options.
This independence allows it to operate without the oversight and limitations typically associated with a larger parent organization. Jathin Kaithavalappil, Assistant Vice President of Institutional Research at Choice Broking, pointed out that spin-offs in the green energy sector facilitate the growth of these businesses by enabling them to directly raise capital from the market through listings, equity offerings, and strategic partnerships.
