Inox Green Energy Services Ltd (formerly Inox Wind Infrastructure Services Ltd), which specialises in the long-term operation and maintenance of wind turbines, will conduct an initial public offering on November 11.
It is one of the leading wind power operation and maintenance (O&M) service providers in India. Subscriptions will be available for this issue on Friday, November 11, and the last day for public subscription for this issue is Tuesday, November 15. The price range for the offer has been fixed at Rs 61 to Rs 65 per share of Rs 10 par value.
The company is a subsidiary of Inox Wind Limited (IWL), which is listed on NSE and BSE Limited, raised an amount of Rs 370 crore through a fresh issue of 56,923,077 shares of Rs 10 each and Rs 740 crore through an offer for sale (OFS) of an equal number of shares (as of fresh issuance) by promoter Inox Wind up to a total of Rs 370 crore.
After this issuance, the promoter’s shareholding ratio decreased from 93.84% of the company’s existing shareholding by 37.8% to 56.04%.
Of the total offering size, 75% of the net offer will be reserved for qualified institutional buyers, 15% for non-institutional investors and the remaining 10% for retail investors.
The company wants to use the net proceeds from the new issue to partially satisfy its requirements for prepayment/repayment of certain borrowings (Rs 260 crore) in whole or in part, and for general corporate purposes. The company will not receive any benefit from the OFS part.
The minimum lot size that investors can bid is 230 shares and their multiples. The minimum investment for retail investors is Rs 14,950 in a price range of 230 shares. Retail investors can apply for up to 13 lots or 2,990 shares for an amount of Rs 1,94,350.
The company is committed to providing long-term operation and maintenance services for the public infrastructure of wind turbines (WTGs) and wind farms. As such, it enjoys synergies with its parent company, IWL, which is primarily a wind turbine manufacturer and provides turnkey solutions, including the supply of wind turbines and other services related to the establishment of wind power projects.
The company has signed an exclusive agreement with IWL to provide exclusive operation and maintenance services for all WTGs sold by IWL through a long-term operation and maintenance agreement of 5 to 20 years. As a result of this exclusive agreement, the company’s future revenue growth is largely dependent on IWL’s orders.
As of June 30, 2022, the company’s portfolio of operations and maintenance services included a total of 2,792 MW of wind farm capacity and 1,396 wind turbines. Of the 2,792 MW of capacity, 1,964 MW came from the company’s integrated O&M service contracts and 828 MW came from public infrastructure O&M contracts.
According to the International Energy Agency (IEA), India is the third largest energy consumer in the world and has become one of the largest sources of global energy demand growth.
On the financial front, the company posted a net profit of Rs 1.7 crore on revenue of Rs 172.2 crore in fiscal 2020. In FY21, revenue was Rs 186.3 crore, with a loss of Rs 27.7 crore for the full year. In FY22, the company’s revenue edged up to Rs 190.2 crore and its loss fell to Rs 5 crore. For Q1FY23, it reported a loss of Rs 11.58 crore on a turnover of Rs 63.16 crore. As such, it posted a negative P/E ratio due to losses over the past 27 months.
Over the past three fiscal years, Inox Green has averaged an EPS of negative Rs 0.86 and an average ROE of -21.5%.
Management has clarified that the company has recorded a net loss due to the interest burden and amortization provisions, but the average EBITDA margin over the years has been above 50%. With the net proceeds from this IPO, the company will be able to significantly reduce its loan and interest burden, thereby increasing its net profit margin.
The company’s key strengths include its strong and diverse existing product portfolio, as well as favourable national renewable energy policies, which provide strong visibility for growth. With the strong support of parent company IWL, the company’s long-term operation and maintenance contracts with customers provide support for reliable cash flow.
Its business strategy is focused on exploring opportunities to expand its portfolio and expand its business while transitioning to an asset-light model with minimal capital expenditure. It intends to continue and intensify its focus on predictive maintenance rather than reactive maintenance, and provide analytics and asset performance forecasting services.
Several other WTG OEMs provide O&M services for their WTGs built under annual maintenance contracts. This arrangement is generally favoured globally, mainly because it is easier to source spare parts or components from the OEM compared to other O&M service providers.
Their main competitors in India are Siemens Gamesa Renewable Energy, S.A., Enercon GmbH, GE and Vestas India.
Independent service providers are typically hired by WTG owners when the OEM’s initial O&M to WTG expires or for other cost-related reasons or when the OEM is unable to provide reliable service for ongoing business operations. In this category, Renom Energy Services LLP, SKF Ltd, Windcare India Pvt Ltd and Kintech Engineering are their main competitors.
Shares of the company are currently trading at a premium of Rs 7-10 per share in the grey market, according to IPO Watch and IPO Central, which track grey market movements.
Shares will be distributed to winning bidders on November 18, and refunds to unsuccessful bidders will be credited to their accounts on November 21. Shares will be credited to the winning bidder’s demat account on November 22 and shares on November 23.
