The Rs 740 crore initial public offer (IPO) of Inox Wind subsidiary, Inox Green Energy Services, will open for subscription on Friday. On the block is a fresh issue of 56,923,077 shares and an offer for sale of 56,923,077 shares, both aggregating up to Rs 370 crore each.
The price band is fixed at Rs 60-65 and, at the upper limit of this band, the IPO is asking for a valuation of 32.7 times EV/Ebitda and 15.6 times EV/Sales on FY22 basis, which looks pricey for a loss-making company. While many analysts have ‘subscribe’ ratings on the issue, they are a bit cautious and see Inox Green only a long-term bet.
Last heard, the IPO was commanding a grey market premium of Rs 9 per share. Bids can be made for a minimum of 230 shares and in multiples of 230 equity shares thereafter. Retail investors can bid a maximum of 13 lots.
"While the company recorded losses in the last two fiscals, the government's thrust on green energy will aid in the company’s growth. The strong and diverse portfolio, favourable national policy support, visibility for future growth, support of long-term O&M contracts
and backing by parent company Inox Wind are key positives, while valuation seems pricey based on current financial position," said Arafat Saiyed of Reliance Securities.
Inox Green Energy Services is a wind power operation and maintenance (O&M) service provider. The company is engaged in providing long-term O&M services for wind farm projects, specifically O&M services for wind turbine generators (WTGs).
The company offers exclusive O&M services for all WTGs sold by Inox Wind through the entry of long-term O&M contracts between the WTG purchaser and terms that typically range between 5 to 20 years.
Choice Broking said there are no comparable peers for Inox Green and said the EV/Sales multiple seems to be on the higher side, given the company's return ratios.
"On the basis of FY24E top-line, demanded EV/Sales comes out to be 8.9 times. The macros of the wind energy segment are improving after the regime change and pandemic led restrictions. With massive capacity addition target over the next five years, target market for the O&M services would expand, thereby benefiting players like Inox Green. Thus, we assign a 'Subscribe with Caution' rating on the issue," it said.
Arihant Capital said Inox Green has a 7 per cent market share in O&M portfolios and has opportunity in inorganic growth through acquisitions of inactive players.
The O&M contracts are long term contracts with price clauses that provide long term revenue visibility, it said.
"A synergistic relationship with Inox Wind, long term O&M contracts, established supply chain and industry growth are expected to drive the business going forward. Post IPO, Inox Green is expected to clear the debt that will reduce the interest cost substantially and improve the bottom line. We are recommending 'Subscribe for Long Term' on this issue," Arihant Capital said.
Inox wind, the promoter, will be the sole seller in the OFS.
The IPO will conclude on November 15.
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