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Sunday, March 15, 2015

Inox Wind Ltd. IPO Review


Issue Highlights

Issue Period
18/3/15-20/3/15
Issue Type
100 % Book Building
Face Value
Rs. 10
Issue Size
Rs. 1,025 crore ( Fresh equity:700 cr, OFS: 325 cr)
Price Band
315-325
Min Bid Lot
45
Maximum Retail Subscription
14 lots
Industry
Wind power solutions
Listing
BSE,NSE
Registrar
Link Intime India Pvt. Ltd.
Retail Discount
Rs. 15

Issue Details:


Offer for sale: 1,00,00,000 equity shares by Gujarat Fluorochemicals Ltd.
( Inox Wind Shall not receive the proceeds of this sale.)
Fresh Issue: 2,15,38,462 equity shares (Calculated Figure)

Company Profile: 

Inox Wind Limited, a part of $2 billion Inox group and promoted by Gujarat Fluorochemicals Limited, was incorporated on April 9, 2009 and the same is involved in the business of making Wind Turbine Generators (WTG) and providing turn-key solutions to wind form projects. As of December 31, 2014, company’s order book was 1258 MW.
The company have manufacturing facilities at Una (HP) to make nacelles & hubs ,Rohika unit at Ahmadabad (Gujarat) to make rotor blade & tower manufacturing.IWL has commences the construction of an integrated manufacturing unit at Barwani (MP) to manufacture all the aforesaid products..
The company provides turnkey solutions for wind farm projects through its subsidies Inox Wind Infrastructures Services Ltd. (IWISL) and Marut Shakti India Ltd. (MSIL).
A few prominent names in its customer lists are Oil India Ltd., Welspun  solar, BSL Ltd., Clean Wind power (a Hero group company), Green Infra Corporate, Renew Wind energy and Tata Power Renewable energy.

Objects of the Issue:

(1)    Expansion and the upgradation of the existing manufacturing facilities: Rs. 148 crore
(2)    Long term working capital requirements: Rs. 290 crore
(3)    Investment in subsidiary IWISL for infrastructure developments: Rs. 132 crore
(4)    General corporate purposes: NA

Risks:

(1)   IWL has limited operating history and it is difficult to project its future profitability
(2)   Top five customers contributed over 85 % of IWL’s income and such a concentrated customer base may be affected badly in case one or more customer parts its way.
(3)   The business requires high working capital

Financial Profile #

Parameters
 Value
PEG (Profit) Ratio ##
3.3
PEG (EPS) Ratio ##
8.7
P/B ##
12
ROCE %
44
ROE %
39.9
Debt/Equity
1.2
Total Liability/ Equity
2.7
Current Ratio
1.2
Interest Cover
6.4
EV/EBITDA
20.3
Inventory Days
40
Price/Sales per Share ##
3.02
# FY 2015 annualized
## using post issue outstanding shares

Inference

Financials of this company are stretched but to some extent satisfactory.Net profit margin is low but one of the best among the global players but net profit is not translating into cash due to high trades receivables and the same is reflected by a Trades Receivable collection period of 134 days. Its only Indian comparable peer is Suzlon energy but Suzlon being a loss making company, comparison would be meaningless.
The company looks expensive in EV/EBITDA terms but the absence of significant domestic competition counterbalances this premium.
Though present government is supposed to give a big thrust on renewable energy but things don’t change overnight and an issue’s success also depends on overall market conditions.
Though return ratios looks lucrative but operating history of the company is limited.

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