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Review By Dilip Davda on December 12, 2023

•    IIL is a niche player in cryogenic equipments and the only player from India. 
•    It worked with ISRO for Chandrayan-3 project with major supply. 
•    The company has been consistently reporting growth in its financial performances.
•    Based on annualized FY24 numbers, the issue appears fully priced,
•    This is a not to miss opportunity in a Numero Uno player in critical segment. 

ABOUT COMPANY:
Inox India Ltd. (IIL) is the largest supplier of cryogenic equipment in India by revenue in Fiscal 2023. (Source: CRISIL Report, November 2023). It has over 30 years of experience offering solutions across design, engineering, manufacturing and installation of equipment and systems for cryogenic conditions. IIL's offering includes standard cryogenic tanks and equipment, beverage kegs, bespoke technology, equipment and solutions as well as large turnkey projects which are used in diverse industries such as industrial gases, liquified natural gas ("LNG"), green hydrogen, energy, steel, medical and healthcare, chemicals and fertilizers, aviation and aerospace, pharmaceuticals and construction. 

In addition, the company manufactures a range of cryogenic equipment utilized in global scientific research projects. It also was the largest exporter of cryogenic tanks from India in terms of revenue in Fiscal 2023. (Source: CRISIL Report, November 2023). The demand for cryogenic equipment across geographies is expected to be driven by the increased demand for cleaner fuels such as LNG and hydrogen due to the focus on reducing carbon emissions from conventional energy sources. (Source: CRISIL Report, November 2023). 

IIL is well positioned to capture this global market growth with in-house technology as well as LNG product range that includes the entire value chain. In hydrogen, its engineering teams are developing products and systems in complex industry environments like hydrogen storage, transportation and distribution to address the need for large scale movements of liquid hydrogen. IIL was the first Indian company to manufacture a trailer mounted hydrogen transport tank, which was designed jointly with the Indian Space Research Organization ("ISRO"). (Source: CRISIL Report, November 2023). It produced and shipped a 238kl liquid hydrogen storage tank for a liquid hydrogen plant in South Korea. The company also has recently produced and shipped four 311kl liquid hydrogen storage tanks for another customer in South Korea for the construction of three liquid hydrogen plants.

IIL's business comprises of three divisions: 1. Industrial Gas: This division manufactures, supplies and installs cryogenic tanks and systems for storage, transportation and distribution of industrial gases like such as green hydrogen, oxygen, nitrogen, argon, carbon dioxide (CO2), hydrogen and provides after-sales services, 2. LNG: This division manufactures, supplies and installs standard and engineered equipment for LNG storage, distribution and transportation as well as small-scale LNG infrastructure solutions suitable for industrial, marine and automotive applications; and 3. Cryo Scientific: This division provides equipment for technology intensive applications and turnkey solutions for scientific and industrial research involving cryogenic distribution.

Its Industrial Gas Division designs, manufactures, supplies and installs vacuum insulated cryogenic storage tanks and systems for the storage, distribution and transportation of industrial gases. The company designs and manufactures customized cryogenic storage tanks and systems for customers' requirements as well as standard storage tank in accordance with industry standards. Its storage tank offering includes stationery storage tanks from 1,000 litres to one million litres capacity, portable storage tanks from 1 litre to 1,000 litres capacity and transport tanks and tankers/trailers up to 60,000 litres capacity. Its product line also includes vaporizers of various types and skid mounted piping skids for pumping and regasification. 

The company also provides engineering, procurement and construction ("EPC") services for cryogenic solutions including bulk storage and regasification equipment, typically associated with petrochemical or steel projects. IIL currently manufactures beverage kegs using the NSF certified stainless steel material, and is implementing the project by entering technology and marketing alliances with international industry players. 

Its LNG Division designs, manufactures and installs standard and engineered solutions for LNG and liquid compressed natural gas ("LCNG") including static storage tanks up to one million litres capacity, transport trailers, LNG satellite stations for industrial users, marine fuel tanks, LNG and LCNG fuel stations and LNG vehicle fuel tanks. In the LNG tank segment, it supplied over 60% of the tanks in both the stationary tank segment which includes all LNG applications including LCNG stations and trailer mounted mobile LNG tanks in India which have a valid PESO license as of May 4, 2022. (Source: CRISIL Report, November 2023). 

It also offers operation and maintenance for LNG solutions. Its Cryo Scientific Division designs, manufactures and installs equipment for technology intensive industrial applications and turnkey solutions for scientific and industrial research involving cryogenic distribution. Company's activities are focused on customized cryogenic storage and distribution systems for space research, cryogenic fuel filling systems for launch pads, space simulation chambers, vacuum jacketed piping and cryostat for magnetic resonance imaging ("MRI") magnets. It is also engaged as one of the few Indian companies in the International Thermonuclear Experimental Reactor ("ITER") project, which is an international nuclear fusion research and engineering megaproject.

It has a diversified customer base across industry sectors and geographies. In the six months ended September 30, 2023 and in Fiscal 2023, Fiscal 2022 and Fiscal 2021, we provided our equipment and systems to 1,255 domestic customers and 254 international customers across its three divisions. IIL's major customers include: 

• Industrial Gas Division: Air Liquide Global E&C Solutions India Private Limited, All Safe Global, Baif Development Research Foundation, CRYONiQ s.r.o., Gulf Cryo LLC, Hyundai Engineering and Construction Co Ltd, INOX Air Product Pvt. Ltd, Carbacid (CO2) Limited, Navin Flourine International Ltd, National Refrigerants Inc., Pentrade Global LLC, Prodair Air Products India Pvt. Ltd, SK ecoengineering Co. Ltd, StemCyte India Therapeutics Pvt. Ltd, Synergy Gases (K) Ltd;

• LNG Division: Caribbean LNG Inc., 2G Energy Inc., AGP City Gas Pvt. Ltd, H-Energy Gateway Pvt. Ltd., Hoglund Gas Solutions AS, IRM Energy Limited, Saint Gobain India Private Limited, Shell Energy India Private Limited; Think Gas Distribution Private Limited, Ultra Gas & Energy Limited; and

• Cryo Scientific Division: ISRO.

As at September 30, 2023, its Order Book was Rs. 1036.61 cr. Its "Order Book" comprises anticipated revenues from the unexecuted portions of existing contracts (which are accepted contracts for which all preconditions have been met). As of October 31, 2023, it had 1016 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden secondary issue i.e. Offer for Sale (OFS) of 22110955 equity shares of Rs. 2 each via book building route. It has announced a price band of Rs. 627 - Rs. 660 and mulls mobilizing Rs. 1459.32 cr. at the upper cap. The issue opens for subscription on December 14, 2023, and will close on December 18, 2023. The minimum application to be made is for 22 shares. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 24.36% of the post-IPO paid-up capital of the company. Since this is an OFS, no fund is going to the company. The issue is being made to unlock listing gains and providing exit to certain investors. 

The company has allocated not more than 50% for QIBs, not less than 15% for HNIs and not less than 35% for Retail investors. The joint Book Running Lead Managers for this issue are ICICI Securities Ltd. and Axis Capital Ltd. while KFin Technologies Ltd. is the registrar of the issue. 

Having issued initial equity shares at par value, the company issued bonus shares in the ratio of 1 for 1 in March 2007 and 1 for 1 in February 2022. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.13, Rs. 0.50, Rs.1.00, Rs. 1.10, Rs. 2.15, Rs. 4.85, and Rs. 5.36 per share. 

Post-IPO, IIL's current paid-up equity capital of Rs. 18.15 cr. (90763500 shares) will remain same as this is a secondary issue. 

This being a secondary issue, its paid-up equity capital will remain same at Rs. 18.15 cr. Based on the upper cap of IPO price band, the company is looking for a market cap of Rs. 5990.39 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 609.00 cr. / Rs. 96.11 cr. (FY21), Rs. 803.71 cr. / Rs. 130.50 cr. (FY22), and Rs. 984.20 cr. / Rs. 152.71 cr. (FY23). For H1 of FY24 it earned a net profit of Rs. 103.34 cr. on a total income of Rs. 580.00 cr. Thus is has posted steady growth in its top and bottom lines for the reported periods. 

For the last three fiscals, the company reported an average EPS of Rs. 14.97 and an average RoNW of 26.86%. The issue is priced at a P/BV of xx based on its NAV of Rs. 61.06 as of September 30, 2023. 

If we attribute FY24 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 29. 

For the reported financial periods, the company has posted PAT margins of 15.78% (FY21), 16.24% (FY22), 15.52% (FY23), 17.82% (H1-FY24), and RoCE margins of 35.15%, 33.70%, 36.53%, 23.75% respectively for the refer periods. 

DIVIDEND POLICY:
The company paid a dividend of 75% (FY22), 550% (FY23), and 550% (FY24) till the filing of this offer document. It has already adopted a dividend policy in July 2022, based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per offer document, the company has no listed peers to compare with. 

MERCHANT BANKER'S TRACK RECORD:
The two BRLMs associated with the offer have handled 71 public issues in the past three fiscals (including the ongoing one), out of which 21 issues closed below the offer price on listing date. 

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