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Review By Dilip Davda on October 16, 2024
• The company is the largest manufacturer of solar PV modules in India and is poised for better progress going forward.
• The company marked bumper growth in its top and bottom lines from FY23 onwards, indicating the prospects ahead.
• It is adding 6GW of ingot wafer, solar cell and solar PV module manufacturing facility in Odisha, that will bring windfall in its financial performance.
• Based on FY25 annualized earnings, the issue appears fully priced.
• Investors may lap it up for medium to long term.
ABOUT COMPANY:
Waaree Energies Ltd. (WEL) is the largest manufacturer of solar PV modules in India with the largest aggregate installed capacity of 12 GW, as of June 30, 2024. (Source: CRISIL Report, page 165) For Fiscal 2024, it had the second best operating income among all the domestic solar PV module manufacturers in India. (Source: CRISIL Report, page 179) The company commenced operations in 2007 focusing on solar PV module manufacturing with an aim to provide quality, cost-effective sustainable energy solutions across markets, and aid in reducing carbon foot-print paving the way for sustainable energy thereby improving quality of life.
Over the years, it has significantly expanded aggregate installed capacity from 4 GW in Fiscal 2022 to 12 GW, as of June 30, 2024, as evidenced by its ability to quickly complete expansion plans efficiently. Subsequent to June 30, 2024, it has commissioned 1.3 GW of solar module manufacturing facility at Noida, Uttar Pradesh through subsidiary, IndoSolar Limited ("IndoSolar Facility"). Its solar PV modules are currently manufactured using multi crystalline cell technology, mono crystalline cell technology and emerging technologies such as Tunnel Oxide Passivated Contact ("TopCon") which helps reduce energy loss and enhances overall efficiency. WEL's portfolio of solar energy products consists of the PV modules such as: (i) multi crystalline modules; (ii) mono crystalline modules; and (iii) TopCon modules, comprising flexible modules, which includes bifacial modules (Mono PERC) (framed and unframed), and building integrated photo voltaic (BIPV) modules. As of the date of this Red Herring Prospectus, it operated five manufacturing facilities in India spread over an area of 143.01 acres. The company operates one factory each located at Surat ("Surat Facility"), Tumb ("Tumb Facility"), Nandigram ("Nandigram Facility"), Chikhli ("Chikhli Facility") in Gujarat, India and the IndoSolar Facility, in Noida, Uttar Pradesh.
WEL's solar PV modules warranties are insured by external parties, which requires it to maintain high standards for insurance approval. It has received a tier-1 PV module maker rating from the Bloomberg New Energy Finance between Fiscal 2018 and Fiscal 2024. Certain of its laboratories are accredited by the National Accreditation Board for Testing and Calibration Laboratories ("NABL") which tests solar PV modules for quality check. Further, it ensures that manufacturing facilities are regularly audited by quality audit firms. It is also included under the ALMM list identified by the GoI, which enables the company to participate in various government schemes aimed at developing the solar industry in India. WEL also manufactures semi-flexible solar panels for sale to global customers through its in-house research and development in product application.
As of March 31, 2022, 2023 and 2024 and as of June 30, 2023 and June 30, 2024, the total numbers of customers served by it in India were 716, 566, 378, 836 and 1,067 while the company served 26, 33, 36, 20 and 12 customers outside India in the same periods, respectively. It intends to follow an expansion strategy of executing regular capacity additions, as well as continuous upgradation of manufacturing technology and processes driven by demand and with a focus on incorporating Mono PERC, large size silicon wafer technology as well as other new emerging technologies including TopCon. As of June 30, 2024, it had 1752 employees on its payroll and is also hiring contract labourers as and when needed.
ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden combo book building route IPO of approx. 28752096 equity shares of Rs. 10 each worth Rs. 4321.44 cr. (at the upper cap). The company has announced a price band of Rs. 1427 - Rs. 1503 per share. The issue constitutes approx. 23952096 fresh equity shares (worth Rs. 3600.00 cr. at the upper cap), and an offer for sale (OFS) of 4800000 shares (worth Rs. 721.44 cr. at the upper cap). The issue opens for subscription on October 21, 2024, and will close on October 23, 2024. The minimum application to be made is for 9 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The IPO constitutes 10.01% of the post-IPO paid-up equity capital of the company. From the net proceeds of the fresh equity issue, the company will utilize Rs. 2775.00 cr. for part financing cost of 6GW of ingot wafer, solar cell and solar PV module manufacturing facility in Odisha by way of investment in wholly owned subsidiary - Sangam Solar One Pvt. Ltd., and the rest for general corporate purposes.
The company has reserved shares worth Rs. 65.00 cr. for its eligible employees and from the rest, it has allocated not more than 50% for QIBs, not less than 15% for HNIs and not less than 35% for Retail investors.
The seven Book Running Lead Managers (BRLMs) to this issue are Axis Capital Ltd., IIFL Securities Ltd., Jefferies India Pvt. Ltd., Nomura Financial Advisory and Securities (India) Pvt. Ltd., SBI Capital Markets Ltd., Intensive Fiscal Services Pvt. Ltd., and ITI Capital Ltd., while Link Intime India Pvt. Ltd. is the registrar to the issue. Syndicate members for this IPO are SBICAP Securities Ltd., Investec Capital Services (India) Pvt. Ltd., and Antique Stock Broking Ltd.
Having issued initial equity shares at par, the company issued/converted further equity shares in the price range of Rs. 40.00 - Rs. 550.00. between March 2014, and September 2024. It has also issued bonus shares in the ratio of 8 for 5 in February 2018. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, Rs. 2.14, Rs. 3.77, Rs. 4.03, and Rs. 225.00 per share.
Post IPO, company's current paid-up equity capital of Rs. 263.33 cr. will stand enhanced to Rs. 287.28 cr. Based on the upper cap of IPO pricing, the company is looking for a market cap of Rs. 43178.67 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 2945.85 cr. / Rs. 79.65 cr. (FY22), Rs. 6860.36 cr. / Rs. 500.28 cr. (FY23), and Rs. 11632.76 cr. / Rs. 1274.38 cr. (FY24). For Q1 of fY25 ended on June 30, 2024, it earned a net profit of Rs. 401.12 cr. on a total income of Rs. 3496.41 cr. It marked quantum jump in its top and bottom lines from FY23 onwards.
For the last three fiscals, the company has reported an average EPS of Rs. 31.94 (basic), and an average RoNW of 26.95%. The issue is priced at a P/BV of 8.84 based on its NAV of Rs. 169.94 as of June 30, 2024, and at a P/BV of 5.35 based on its post-IPO NAV of Rs. 281.16 per share (at the upper cap).
If we attribute FY25 annualized super earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 26.91, and based on FY24 earnings, the P/E stands at 44.36. The issue relatively appears fully priced.
The company reported PAT margins of 2.70% (FY22), 7.29% (FY23), 10.96% (FY24), 11.47% (Q1-FY25), and RoCE margins of 23.49%, 48.83%, 36.95%, 9.56% for the referred periods, respectively.
DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It adopted a dividend policy in September 2021, based on its financial performance and future prospects.
COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Websol Energy, and Premier Energies, as their listed peers, they are trading at a P/E of NA and NA (as of October 16, 2024). However, they are not truly comparable on an apple-to-apple basis.
MERCHANT BANKER'S TRACK RECORD:
The seven BRLMs associated with the offer have handled 82 public issues in the past three fiscals, out of which 22 issues closed below the offer price on listing date.
Review By Dilip Davda on October 16, 2024
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Waaree Energies Limited offers an early investment opportunity in Waaree Energies Limited. A stock market investor can buy Waaree Energies IPO shares by applying in IPO before Waaree Energies Limited shares get listed at the stock exchanges. An investor could invest in Waaree Energies IPO for short term listing gain or a long term.
Read the Waaree Energies IPO recommendations by the leading analyst and leading stock brokers.
Waaree Energies IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Waaree Energies IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Waaree Energies IPO is to subscribe.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the Waaree Energies IPO.
The Waaree Energies IPO allotment status will be available on or around October 24, 2024. The allotted shares will be credited in demat account by October 25, 2024. Visit Waaree Energies IPO allotment status to check.
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