Inox Green Energy IPO: Can this renewable energy player keep your portfolio in green?

New Delhi: The initial public offering (IPO) of Inox Green Energy Services opened for subscription on Friday. The company intends has priced its shares in the range of Rs 61-65 apiece to raise Rs 740 crore from primary markets.

The issue consists of a fresh equity sale worth Rs 370 crore and an offer for sale of the same amount from its parent company Inox Wind. Investors can make a minimum bid of 230 equity shares and in multiples thereof.

Incorporated in 2012, Inox Green Energy is one of the major wind power operation and maintenance (O&M) service providers within India.

The company, which is a subsidiary of Inox Wind, has a presence in Gujarat, Rajasthan, Maharashtra, Madhya Pradesh, Karnataka, Andhra Pradesh, Kerala and Tamil Nadu.

For the year ended on March 31, 2022, the company reported a net loss of Rs 4.95 crore with total revenue of Rs 190.23 crore. For the period ended June 30, it reported a loss of Rs 11.58 crore with a revenue of Rs 63.13 crore.

The company has allotted a 75% quota to qualified institutional buyers, whereas non-institutional buyers will get 15% of the shares. The remaining 10% shares will be allocated to the retail bidders.

Edelweiss Financial Services, DAM Capital Advisors, Equirus Capital, IDBI Capital Market Services and Systematix Corporate Services are managers to the issue, whereas Link Intime India is appointed as the registrar to the issue.

Here is what a host of brokerage firms said about the initial public offering of Inox Green Energy Services:

KR Choksey Research
Rating: Subscribe
The valuation of Inox Green looks reasonable, considering the nature of its business and the comparative margin profiles. Inox Green has much better EBITDA margins than its global peers, said KR Choksey Research.

"We are cautious about the company's order book as most of its contracts are from its parent. We are optimistic considering the consistent track record of the company, strong parentage, and government initiatives to push the renewable sector. We also expect the financials to improve with reducing debt on the books," it added with a 'subscribe' rating.

Choice Broking
Rating: Subscribe with caution
At the higher price band, the company is demanding an EV/sales multiple of 13.6x (based on FY22 sales), which seems to be on the higher side considering the return ratios, said Choice Broking.

The macros of the wind energy segment are improving after the regime change and pandemic-led restrictions. With a massive capacity addition target over the next five years, the target market for the O&M services would expand, it added with a 'subscribe with caution' rating.

Arihant Capital
Rating: Subscribe for long-term
Inox Green has a 7% market share in O&M portfolios and has an opportunity for inorganic growth through the acquisitions of inactive players. The O&M contracts are long-term contracts with price clauses which provide long-term revenue visibility, said Arihant Capital.

"Inox Green is expected to clear debt which will reduce the interest cost substantially and improve bottom levels. The issue is valued at an EV/EBITDA of 22x based on FY22 EBITDA," it added with a 'subscribe for long-term' rating.

Reliance Securities
Rating: Not Rated
The company recorded losses in the last two fiscals. The government's thrust on green energy will aid in the company’s growth, said Reliance Securities in its pre-IPO note.

"The strong and diverse portfolio, favourable national policy support, visibility for future growth, support of long-term contracts and backing by the parent company are key positives, while valuation seems pricey based on the current financial position," it added.

Hem Securities
Rating: Subscribe for long-term
The company has a strong and diverse existing portfolio base with an established track record. Also, favourable national policy support and visibility for future growth are working positively for the company, said Hem Securities.

"The company has an established supply chain in place and has a strong and experienced management team. But looking after the present financials of the company, we recommend to subscribe the issue for long term," it added.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)