The company's performance in Q3 FY26 presents a tale of two narratives: strong operational momentum on a year-on-year basis, offset by sequential deterioration driven by financial costs. Whilst revenue growth remains healthy at 21.52% YoY, the quarter witnessed a concerning 9.99% QoQ decline in net sales to ₹612.29 crores. More troubling is the sharp compression in profitability metrics, with PAT margin collapsing from 32.41% in Q2 to just 14.11% in Q3, primarily due to interest expenses rising to ₹206.93 crores and depreciation climbing to ₹261.35 crores.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | PAT Margin |
|---|---|---|---|---|---|
| Sep'25 (Q3) | 612.29 | -9.99% | 87.59 | -60.27% | 14.11% |
| Jun'25 (Q2) | 680.21 | +9.31% | 220.48 | -5.46% | 32.41% |
| Mar'25 (Q1) | 622.27 | +23.20% | 233.22 | +255.46% | 37.48% |
| Dec'24 (Q4) | 505.08 | +0.24% | 65.61 | +72.48% | 12.99% |
| Sep'24 (Q3) | 503.85 | -12.90% | 38.04 | -72.56% | 7.28% |
| Jun'24 (Q2) | 578.45 | +13.84% | 138.61 | +71.23% | 23.96% |
| Mar'24 (Q1) | 508.14 | — | 80.95 | — | 15.93% |
Financial Performance: Growth Masked by Cost Pressures
On a nine-month basis (H1 FY26 plus Q3), NTPC Green Energy demonstrated resilience with consolidated net profit reaching ₹325.55 crores, marking a 34.38% increase compared to the corresponding period last year. Net sales for the nine-month period stood at ₹1,914.77 crores, up 19.60% YoY, reflecting the company's expanding renewable energy portfolio. However, the quarterly snapshot reveals mounting pressure on profitability.
In Q3 FY26, operating profit before depreciation, interest, and tax (excluding other income) stood at ₹529.60 crores, down 12.25% QoQ but up 26.12% YoY. The operating margin (excluding other income) contracted to 86.49% from 88.73% in Q2, indicating some operational efficiency loss. More concerning is the 37.89% QoQ decline in other income to ₹44.43 crores from ₹71.48 crores, reducing the cushion available to absorb financial costs.
The most significant headwind came from interest expenses, which climbed to ₹206.93 crores in Q3 from ₹192.56 crores in Q2, representing a 7.46% QoQ increase. Depreciation charges also rose sharply to ₹261.35 crores from ₹223.33 crores, up 17.02% QoQ. These twin pressures on the profit and loss account reflect the capital-intensive nature of renewable energy projects and the company's aggressive capacity expansion plans, which are being funded through significant debt accumulation.
Operational Challenges: The Debt Burden Dilemma
NTPC Green Energy's balance sheet reveals the structural challenge facing the company. As of March 2025, long-term debt stood at ₹17,301.43 crores, up 42.24% from ₹12,164.51 crores in March 2024. This debt surge has been necessary to fund the company's fixed asset base, which expanded to ₹21,815.93 crores from ₹17,573.01 crores, a 24.14% increase. The debt-to-equity ratio of 0.40 remains manageable, but the debt-to-EBITDA ratio of 4.65 indicates that the company carries a substantial debt burden relative to its operating cash generation capacity.
Critical Profitability Concerns
Return on Equity: At just 4.28% (average) and 2.61% (latest), NTPC Green Energy's ROE is significantly below industry standards, indicating poor capital efficiency. The company is generating minimal returns for shareholders despite substantial equity capital of ₹18,440.34 crores.
Return on Capital Employed: ROCE stands at a weak 5.54% (average) and 4.08% (latest), suggesting that the company's investments in renewable energy assets are not generating adequate returns relative to the capital deployed.
Interest Coverage: EBIT-to-interest ratio of just 1.80x indicates thin interest coverage, leaving little room for error if operating performance deteriorates further.
The company's cash flow statement for FY25 highlights the capital intensity of its business model. Cash flow from operations was robust at ₹1,998 crores, but this was dwarfed by investing outflows of ₹17,793 crores, primarily for capacity additions. The funding gap was bridged through financing activities that brought in ₹15,714 crores, predominantly debt. This pattern is typical for renewable energy companies in growth phase, but it raises questions about when the company will transition from cash-consuming growth to cash-generative operations.
The Valuation Paradox: Premium Pricing for Below-Average Returns
NTPC Green Energy trades at a staggering price-to-earnings ratio of 158.95x, nearly five times the power sector average of 30x. The company's price-to-book value of 4.15x also represents a significant premium, especially when compared to its ROE of just 4.28%. This valuation disconnect suggests that investors are pricing in substantial future growth and profitability improvements that have yet to materialise in the financial statements.
Valuation Reality Check
The company's enterprise value-to-EBITDA multiple of 49.02x and EV-to-sales of 42.19x are amongst the highest in the power sector. Whilst renewable energy companies typically command premium valuations due to their growth potential and favourable regulatory environment, NTPC Green Energy's multiples appear stretched given its current profitability profile and return metrics. The stock is officially classified as "Very Expensive" by valuation standards.
| Metric | NTPC Green | Sector Avg | Premium/(Discount) |
|---|---|---|---|
| P/E Ratio (TTM) | 158.95x | 30.00x | +430% |
| P/BV Ratio | 4.15x | 3.90x | +6% |
| EV/EBITDA | 49.02x | — | — |
| EV/Sales | 42.19x | — | — |
Peer Comparison: Lagging on Returns, Leading on Valuation
A comparison with power sector peers reveals NTPC Green Energy's relative positioning. The company's ROE of 4.28% is the lowest amongst its peer group, significantly trailing Power Grid Corporation (17.22%), Adani Green (13.56%), Tata Power (10.20%), and even sector laggard NHPC (9.11%). Despite this profitability disadvantage, NTPC Green Energy commands premium valuation multiples, suggesting that market participants are betting on future execution rather than current performance.
| Company | P/E (TTM) | P/BV | ROE % | Div Yield | Debt/Equity |
|---|---|---|---|---|---|
| NTPC Green Energy | 158.95 | 4.15 | 4.28% | — | 0.40 |
| Power Grid Corporation | 16.01 | 2.46 | 17.22% | 3.40% | 1.28 |
| Adani Green Energy | 82.76 | 7.25 | 13.56% | — | 4.20 |
| Tata Power | 28.99 | 3.11 | 10.20% | 0.61% | 1.56 |
| Adani Energy Solutions | 48.82 | 4.69 | 10.54% | — | 1.68 |
| NHPC | 25.07 | 1.93 | 9.11% | 2.45% | 1.02 |
The peer analysis reveals that NTPC Green Energy's valuation premium is not justified by superior return metrics. Power Grid Corporation, trading at just 16x earnings, delivers an ROE of 17.22% and pays a dividend yield of 3.40%. Even Adani Green Energy, which trades at a premium 82.76x P/E, generates an ROE of 13.56%—more than three times that of NTPC Green Energy. The valuation gap suggests that either NTPC Green Energy is significantly overvalued, or the market expects dramatic improvements in profitability that are not yet evident in the numbers.
Shareholding Pattern: Stable Promoter Base, Cautious Institutions
The shareholding pattern reveals a highly concentrated ownership structure with NTPC Ltd. maintaining a steady 89.01% promoter stake across the last five quarters. Institutional participation remains modest, with foreign institutional investors holding just 1.61% (down from 2.18% in December 2024), mutual funds at 3.43%, and insurance companies at 1.31%. The sequential decline in FII holdings—down 57 basis points over four quarters—signals caution amongst global investors about the company's valuation and near-term profitability trajectory.
| Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 89.01% | 89.01% | 89.01% | 89.01% | 0.00% |
| FII | 1.61% | 1.79% | 1.85% | 1.98% | -0.18% |
| Mutual Funds | 3.43% | 3.25% | 3.22% | 3.40% | +0.18% |
| Insurance | 1.31% | 1.32% | 1.33% | 1.41% | -0.01% |
| Other DII | 0.06% | 0.06% | 0.11% | 0.06% | 0.00% |
| Public | 4.58% | 4.57% | 4.49% | 4.14% | +0.01% |
The marginal uptick in mutual fund holdings to 3.43% from 3.25% in September 2025 provides a small positive signal, suggesting that some domestic institutional investors see value at current levels. However, the overall institutional holding of just 6.42% remains remarkably low for a company with a market capitalisation exceeding ₹78,000 crores, indicating that the broader investment community remains unconvinced about the risk-reward proposition at prevailing valuations.
Stock Performance: Sustained Underperformance Across Timeframes
NTPC Green Energy's stock performance has been disappointing across multiple timeframes. Over the past year, the stock has declined 19.68%, significantly underperforming the Sensex's 7.88% gain—a negative alpha of 27.56 percentage points. The underperformance is even more pronounced when compared to the broader power sector, which declined 12.92% over the same period; NTPC Green Energy's additional 6.76 percentage point underperformance suggests company-specific concerns beyond sectoral headwinds.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +1.14% | +0.31% | +0.83% |
| 1 Month | -2.90% | -2.51% | -0.39% |
| 3 Months | -12.13% | -2.86% | -9.27% |
| 6 Months | -13.02% | +1.51% | -14.53% |
| YTD | -2.44% | -3.11% | +0.67% |
| 1 Year | -19.68% | +7.88% | -27.56% |
From a technical perspective, the stock is currently in a bearish trend, trading below all key moving averages—5-day (₹91.49), 20-day (₹92.50), 50-day (₹92.78), 100-day (₹96.85), and 200-day (₹101.36). The stock's current price of ₹92.29 is just 9.09% above its 52-week low of ₹84.60 but 23.51% below its 52-week high of ₹120.65, indicating sustained selling pressure. Technical indicators across weekly and monthly timeframes—MACD, Bollinger Bands, Moving Averages, and KST—all flash bearish signals, suggesting that the downtrend may persist in the near term.
"With a P/E of 159x and ROE of just 4.3%, NTPC Green Energy exemplifies the valuation-fundamentals disconnect that often characterises early-stage renewable energy companies."
Investment Thesis: Growth Story Undermined by Execution Challenges
NTPC Green Energy's investment case rests on India's ambitious renewable energy targets and the company's parentage under NTPC, one of India's largest power generators. The government's push towards 500 GW of renewable energy capacity by 2030 provides a favourable backdrop for growth. However, the company's current financial performance raises serious questions about execution capabilities and the timeline for achieving sustainable profitability.
The company's quality grade of "Average" reflects its mixed performance across key parameters. Whilst the 245.20% five-year sales growth demonstrates strong topline momentum, the weak profitability metrics—ROE of 4.28%, ROCE of 5.54%, and EBIT-to-interest coverage of just 1.80x—indicate that growth is coming at the expense of returns. The debt-to-EBITDA ratio of 4.65 is elevated for a company with such thin margins, raising concerns about financial flexibility if operating conditions deteriorate.
Key Strengths & Risk Factors
Key Strengths
- Strong Parentage: 89.01% ownership by NTPC Ltd. provides financial backing and project execution support
- Robust Revenue Growth: 245.20% five-year sales CAGR demonstrates strong capacity addition momentum
- Sector Tailwinds: India's renewable energy push and favourable policy environment support long-term growth
- High Operating Margins: 86.49% operating margin (excluding other income) reflects asset-light operational model
- Zero Promoter Pledging: No pledged shares indicates strong promoter confidence
- Expanding Asset Base: Fixed assets grew 24.14% to ₹21,815.93 crores, indicating capacity expansion
Key Concerns
- Weak Return Metrics: ROE of 4.28% and ROCE of 5.54% are significantly below industry standards
- Elevated Valuation: P/E of 159x and P/BV of 4.15x appear unjustified given current profitability
- Rising Financial Costs: Interest expenses climbing 7.46% QoQ to ₹206.93 crores pressuring margins
- Thin Interest Coverage: EBIT-to-interest ratio of 1.80x leaves minimal cushion for operational volatility
- High Debt Burden: Debt-to-EBITDA of 4.65 indicates stretched leverage relative to cash generation
- Declining Institutional Interest: FII holdings down from 2.18% to 1.61% over four quarters
- Negative Free Cash Flow: Cash burn of ₹15,795 crores (investing minus operating cash flow) in FY25
Outlook: What Lies Ahead
Positive Catalysts
- New capacity commissioning leading to revenue ramp-up
- Improvement in asset utilisation rates boosting profitability
- Debt refinancing at lower rates reducing interest burden
- Government policy support for renewable energy sector
- Transition from growth phase to steady-state operations improving cash flows
Red Flags to Monitor
- Further deterioration in quarterly profitability metrics
- Continued decline in institutional shareholding
- Interest coverage falling below 1.5x
- Project execution delays affecting revenue visibility
- Debt levels rising faster than EBITDA growth
The coming quarters will be critical for NTPC Green Energy to demonstrate that its aggressive capacity expansion translates into improved profitability. Investors should monitor quarterly interest coverage trends, the trajectory of return ratios, and whether the company can stabilise margins above 20% on a sustainable basis. The stock's technical setup remains weak, and any recovery will likely require a fundamental catalyst in the form of significantly improved quarterly results or clarity on capacity monetisation timelines.
The Verdict: Avoid Until Profitability Improves
Score: 30/100
For Fresh Investors: Avoid initiating positions at current valuations. The P/E of 159x is unjustifiable given ROE of just 4.3% and deteriorating quarterly profitability. Wait for substantial improvement in return metrics or a significant valuation correction before considering entry.
For Existing Holders: Consider reducing positions on any technical bounce. The combination of expensive valuation, weak fundamentals, bearish technicals, and declining institutional interest presents an unfavourable risk-reward profile. Book profits and reallocate to better opportunities within the power sector.
Fair Value Estimate: ₹65-70 (29-32% downside from current levels), based on 100x P/E applied to normalised earnings potential, or 3x P/BV given current ROE profile.
Note— ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
