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Energy stocks regained momentum in 2023 as new policy initiatives drove investments in the sector. The Nifty Energy Index doubled between March 1, 2023 and September 27, 2024, with green energy stocks leading the rally. Several small and medium sized renewable energy companies capitalised on this bullish momentum and their strong revenue and earnings growth in FY24 to make their debut in the stock market.
The driving force behind this surge is India’s ambitious target of achieving 500 GW of renewable energy capacity by 2030. So far, the country has crossed 217 GW, with 27.9 GW added in 2024 alone. While this growth is impressive, reaching the 500 GW milestone will require an annual capacity addition of 50 GW — a challenge the sector is ready to embrace.
However, the Nifty Energy Index has dipped 30% from its September 2024 peak, making investors wonder if the green energy boom has hit a speed breaker. For this one needs to understand what factors are influencing the industry’s future growth prospects.
Three trends are shaping up in the renewable energy space.
Over 298 IPOs raised Rs 1.4 lakh crore in India in 2024, led by energy and manufacturing sectors. The combination of manufacturing and green energy was a big hit in 2024 as IPOs of solar photovoltaic (PV) module makers made a blockbuster debut in the stock market.
India’s two largest solar PV module makers, Premier Energies and Waaree Energies, listed on the NSE at premiums of 120% and 66.33%, respectively, from their IPO prices in September and October 2024. In February and July 2024, small and medium enterprises (SME) IPOs — Alpex Solar and Ganesh Green Bharat — also listed at premiums of 231% and 90%, respectively.
However, by November 2024, investors’ enthusiasm began to wane. NTPC Green Energy stock listed on the NSE at a 3% premium while Acme Solar Holdings stock listed at a 13.15% discount.
Despite the cooling sentiment, several renewable energy players have filed their draft red herring prospectuses with SEBI. Among them are Vikram Solar, Solar91 Cleantech, Solarworld Energy, Continuum Green Energy, Solarium Green, PMEA Solar Tech Solutions, Saatvik Green Energy, and GK Energy.
In 2025, so far, BSE postponed Solar91 Cleantech IPO to address queries around the use of IPO proceeds, while solar EPC provider Solarium Green Energy listed on 13 February 2025 at a 5.7% premium.
This raises a question: Is the tepid IPO response since November 2024 because investors’ appetite for green energy has reduced or is there another reason?
While IPOs of solar PV manufacturers are doing well, green energy EPC and IPP are not able to excite investors. Behind this stark difference are government initiatives.
Government subsidies and support play a crucial role in making renewable energy affordable. Despite the falling cost of wind and solar, they are still more expensive than thermal. Hence, any increase in government subsidies boosts investments in green energy.
At present, subsidies are skewed towards manufacturing which is driving their earnings. The solar PV module manufacturers – Premier, Waaree, and Alpex – are beneficiaries of Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM Scheme) and PM Surya Ghar: Muft Bijli Yojana announced in February 2024. Their order books, revenue, and profits are breaking records as retail orders have faster execution.
Premier Energies reported a 140% year-over-year jump in revenue and a 490% jump in consolidated net profit in Q3 FY25. It even secured a Rs 1,234 crore order for solar PV modules. Similarly, Waaree’s Q3 FY25 revenue and profit after tax increased by 116.6% and 260% YoY, respectively. It is using the IPO proceeds to build new factories to meet the growing demand.
To add the cherry on top, the National Manufacturing Mission launched in the Union Budget 2025 will support industries in the production of solar PV cells, electrolysers, wind turbines, high-voltage transmission equipment, and grid-scale batteries.
However, the other side of the renewable supply chain is still struggling. EPC and Operations & Maintenance (O&M) service providers build and maintain solar and wind projects. The acquisition of land is a challenge that causes delays in project commissioning. Hence, many EPC and O&M service providers have significant working capital requirements and huge debt.
That explains investors’ tepid response to NTPC Green Energy and Solarium Green Energy. NTPC Green Energy has a significant land bank. Its total income rose 15.5% to Rs 531.2 crore, and profit after tax surged 52.5% YoY to Rs 89.42 crore.
It is safe to assume that it is not the investors’ appetite for green energy that has reduced but investors are just not excited about EPC and IPP IPOs.
To encourage large scale solar and wind projects, the Ministry of Power offered a 100% waiver on Inter-State Transmission Charges (ISTS) for 25 years on projects commissioned on or before 30 June 2025. After this period, the waiver will be phased out to 75% for the next year, 50% the year after it, and 25% after.
This ISTS waiver boosted investment in renewable energy and EPC service providers saw a surge in projects. This encouraged EPC service providers like Solarium Green Energy to take the IPO route to meet working capital needs and repay a portion of their debt. Faster commissioning of power projects can help boost EPC profits which will require policy support.
However, boosting renewable energy production alone cannot help India achieve the 500 GW target by 2030. This energy should also be accessible to consumers.
In India, there is a lack of parity in the renewable energy potential of the states. States that produce excess renewable energy do not have adequate battery storage or grid infrastructure for inter-state transfer, which makes renewable energy projects unfeasible.
The next step is to boost investments in battery storage and grid infrastructure to facilitate seamless transmission of excess capacity from RE-surplus states to RE-deprived states. However, transmission projects have to pick up pace as they take 3-4 years to build while renewable energy projects take just 12 to 24 months to develop.
As renewable generation is happening at a faster rate than transmission, renewable energy producers are unable to sell the surplus, which is limiting their generation potential.
Government initiatives to boost power transmission
The government is accelerating support towards battery storage and transmission capacity by promoting domestic production of high-voltage transmission equipment and grid-scale batteries.
The government has allocated Rs 9.15 lakh crore towards the National Electricity Plan 2023 to 2032 for Central and State Transmission Systems. The plan aims to expand the transmission network from 4.85 lakh ckm in 2024 to 6.48 lakh ckm in 2032. Under the plan. nine High Voltage Direct Current (HVDC) lines of 33.25 GW capacity will be added.
The government’s green energy initiatives can be summed up as follows:
The government’s accelerated investments, policy support, and efforts to make green energy an economically feasible option could drive order books across the supply chain. However, the big question remains: can the power infrastructure replicate the 2022-2024 success of transport infrastructure (roads and rails) in the 2025-2030 period?
As the 2030 deadline nears, momentum is picking up, investments are pouring in, and order books are filling up. The green energy space is getting crowded with IPOs.
Investors should tread with caution and look at price-to-earnings (PE) ratio and debt before investing in these IPOs. Waaree and Premier Energies have already dipped below the listing price due to their stretched valuations.
Even after correcting 26.6% year to date to Rs 2,099, Waaree Energies stock trades at a PE ratio of 61.6x, much above the IPO price (Rs 1,550) PE ratio of 31.28x. As for Premier Energies, the stock trades at 188x PE even after a 27.5% correction share price in 2025 to Rs 966. This ratio is way above the IPO price (Rs 450) valuation of 64.93x.
Renewable energy projects – be it generation, storage, or transmission – are capital-intensive and prone to delays. They depend heavily on government incentives and policies for their feasibility.
While it is too early to gauge the growth potential of renewable energy IPOs, they are worth adding to the watch list to see how India’s green energy story unfolds.
A risk-averse strategy could be to add established players like Suzlon Energy and JSW Energy to your watchlist. These companies have a sound balance sheet and a strong execution record.
Note: We have relied on data from http://www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate but widely used and accepted source of information.
Puja Tayal is a financial writer with over 17 years of experience in the field of fundamental research.
Disclosure: The writer and his dependents do hold the stocks discussed in this article.
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