In­vestors may Con­sider Inox Wind Of­fer

The Economic Times - - Markets & Finance -

er­a­tional by FY16, its ca­pac­ity will dou­ble. The com­pany has sold wind power with ca­pac­ity of 1,042 MW since it be­gan its op­er­a­tions in 2010. The com­pany’s mar­ket share in FY14 in­creased to 15.71%, up from a mere 3.87% in FY12. In the nine months of FY15 (Apr-Dec), the com­pany re­ceived nearly 40% of its to­tal WTG or­ders. Higher wind tur­bine ef­fi­ciency, su­pe­rior project ex­e­cu­tion ca­pa­bil­i­ties, and pipe­line of project sites have helped the com­pany grab this mar­ket share. The size of its or­der book is 1,258MW — of which 65% is part of bind­ing con­tracts. While a large num­ber of its peers are strug­gling to ex­pand, Inox Wind has been gain­ing mar­ket share with its net profit grow­ing at a CAGR of 130% in the past four years end­ing De­cem­ber FY15. In the Union Bud­get for FY16, the gov­ern­ment planned to tar­get wind power ca­pac­ity of 80,000 MW by 2022. For the first time, the gov­ern­ment is giv­ing a gross gen­er­a­tion-based in­cen­tive (GBI) and an ac­cel­er­ated de­pre­ci­a­tion to­gether to firms set­ting up wind power plants. Th­ese in­cen­tives pro­vide tax benefits. The gov­ern­ment is also ask­ing com­pa­nies to set up coal ther­mal power plants, 10% of which would be re­new­able en­ergy plants.

Risk & Con­cerns

High work­ing cap­i­tal needs have put pres­sure on the com­pany’s cash gen­er­a­tion abil­ity. Its trade re­ceiv­ables dur­ing the last nine months of FY15 stood at 77% of its to­tal rev­enues. Con­se­quently, it has been record­ing a neg­a­tive cash inflow. Trade re­ceiv­ables have in­creased by a whop­ping 104% dur­ing the nine months of FY15 against the sale of prod­ucts, which rose by 89% dur­ing the same pe­riod. There is also a yawn­ing gap be­tween the in­stalled ca­pac­ity of WTG man­u­fac­tured and the cur­rent de­mand. This could put pres­sure on its mar­gins if com­pe­ti­tion be­comes stiff. The com­pany is plan­ning to raise .` 1,000 crore through the IPO — .` 700 crore will be raised via a fresh is­sue of shares and the bal­ance by an of­fer for sale by the pro­mot­ers. Post the IPO, the pro­moter’s hold­ing will drop to 85% from the pre-is­sue level. Its price band is fixed be­tween .` 315 and .` 325.

At the higher end of the price band, it will have an im­plied val­u­a­tion of .` 7,200 crore. Ac­cord­ing to an­a­lysts’ es­ti­mates, at .` 325 per share, the stock is quot­ing an EV/EBIDTA of 11.5 times its FY17 pro­jected op­er­at­ing prof­its. This is at a pre­mium when com­pared with global WTG com­pa­nies’ av­er­age. This pre­mium is jus­ti­fied given the growth prospects of In­dia’s re­new­able en­ergy seg­ment, which is likely to gen­er­ate high re­turn of eq­uity.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.