Inox Green Energy IPO Fundamental Analysis (Avoid)

Inox Green IPO Review

Inox Green is a major wind power operation and maintenance ("O&M") service providers within India. The Company is engaged in the business of providing long-term O&M services for wind farm projects, specifically the provision of O&M services for wind turbine generators ("WTGs") and the common infrastructure facilities on the wind farm which support the evacuation of power from such WTGs.
Operations services consist of remote monitoring & control through supervisory control and data acquisition (SCADA), coordination with DISCOMs which covers timely reading of energy meter, in addition to other host of offerings. It also covers operation services provision of Daily Generation Reports to the customers, implementation of Quality, Safety and Environment management systems for their own and outsourced staff in line with the latest ISO standards.
Maintenance service of WTGs is generally categorised into predictive and reactive maintenance. In reactive maintenance, repairs are undertaken once a component fails and often results in long downtimes for the affected WTG. In predictive maintenance, efforts are taken to detect potential component failures in advance so as to be able to resolve any issues early and minimize such downtime.
As of June 30, 2022, our portfolio of O&M contracts(consisting of both comprehensive O&M contracts and common infrastructure O&M contracts) covered an aggregate of 2,792 MW of wind projects spread across eight wind-resource rich states in India (Maharashtra, Madhya Pradesh, Tamil Nadu, Gujarat, Andhra Pradesh, Rajasthan, Karnataka and Kerala) with an average remaining project life of more than 20 years
The Issuer is a member of the Inox GFL Group, which principally operates in the speciality chemicals and renewable energy sectors and has historical connections with the wider Inox Group which commenced operations in 1923. The Inox GFL Group includes three publicly listed companies, namely Gujarat Fluorochemicals Limited ("GFL"), Inox Wind Energy Limited and IWL.

Financial Review

Inox Green posted total revenues of Rs 63 crores with losses of Rs 11 crore for the first quarter of FY23. Revenues for FY22 and FY21 was Rs 190 crore and Rs 186 crore with losses of Rs 4.95 crore and Rs 27.73 crore respectively. However the EBITDA margins are strong as can be seen from the table.

The Issuer appears to be highly leveraged; debt to equity ratio being 1.12x (Q1FY23), 1.02x (FY22), 31.71x (FY21) and 116.70x (FY20) respectively.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Particulars	Q1FY2023	FY2022	FY2021	FY2020
Total Revenue	63.16	190.23	186.29	172.16
Revenue from Operations	61.29	172.17	172.25	165.32
PAT	-11.58	-4.95	-27.73	1.68
EBITDA	18.93	100.26	77.27	95.35
Total Assets	2127.74	2120.65	2692.8	2339.9
EBITDA Margin	30.67%	58.23%	44.86%	57.68%
Net Margin	-18.33%	-2.66%	-16.11%	-0.07%

Valuation and Peer Comparison

P/E of the Issuer could not be ascertained due to negative EPS. There are no listed peers as per the RHP

Issue Details

Inox Green IPO (Rs 740 crore) opens on 11th Nov- 14th Nov 2022 with a price band of 61-65 per share. Retail quota is 10% and investors can apply with minimum bid of 230 shares (Rs 14,950). Maximum lot size is 13; 2990 shares (Rs 1,94,350).The issue is both fresh issue (Rs 370 crore) an offer for sale (Rs 370 crore) by promoter shareholder, Inox Wind Limited, promoter. Net proceeds would be used to repay the debt (Rs 270 crore) and rest towards corporate purposes. The Issue is expected to list on 23rd Nov 2022.

Conclusion and Investment Strategy

The Government is promoting wind power projects in entire country through private sector investment by providing various fiscal and financial incentives such as Accelerated Depreciation benefit; concessional custom duty exemption on certain components of wind electric generators. Besides, Generation Based Incentive (GBI) Scheme was available for the wind projects commissioned before 31 March 2017.

The statements of the management are very forward looking and as per them wind sector is going to turnaround strongly over the next couple of years. It should be noted here that there were some operational weaknesses at IWL (parent company) as per a crisil report. Though the Issuer has good order book for the next couple of years but a lot would depend on the execution capabilities and further the proceeds are going to be used clean up the debt of the company! The topline for Inox Green has remained quite stable for the last three fiscals but the bottomline is under pressure with losses in the last three fiscals and for Q1FY23.

Hence one may Avoid this IPO for the time being.

Reviewer recommends Avoid to the issue.

Review By CA Priyanka Choudhary on 4th Nov 2022

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

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 prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.