Inox Green Energy Services IPO opens this week: All you need to know

Inox Green Energy Services Limited IPO opens for subscription on 11th November. The company is looking to raise up to Rs 740.00 crore through the public issue. Here are the details: 

Inox Green Energy Services Limited (IGESL) IPO Details

• Inox Green Energy Services IPO Date: 11 November - 15 November 2022
• Inox Green Energy Services IPO Price band: Rs 61 - Rs 65
• Inox Green Energy Services IPO Issue Size: Rs 740 crore (Fresh Issue of Equity shares aggregating up to Rs 370 crore and remaining OFS)
• Reservation: QIB 75%, Retail - 10%, NII 15%
• Minimum Investment: Rs 14,950
• Post Issue Implied Market Cap: Rs 1804 – 1898 crore
• Bid lot: 230 shares, and in multiples of 230 shares

Inox Green Energy Services Limited IPO: Objects of the Issue

The net proceeds of the fresh issue will be used for below purposes:

• Repayment and/ or pre-payment, in full or part, of certain borrowings availed by the company including redemption of Non-Convertible Debentures in full.
• General corporate purposes.

Inox Green Energy Services Limited IPO: About Inox Green Energy

• The company was incorporated in 2012 and is one of the major wind power operation and maintenance service providers.
• It is a subsidiary of Inox Wind Limited, which is a listed company on NSE and BSE and part of the Inox GFL group of companies.
• IGESL is engaged in providing long-term O&M services for wind farm projects, specifically the provision of O&M services for wind turbine generators and the common infrastructure facilities on the wind farm, which support the evacuation of power from such WTGs.
• The company provides exclusive O&M services for all WTGs sold by IWL through the entry of long-term O&M contracts between the WTG purchaser and themselves for terms that typically range between five to twenty years.
• Its O&M services portfolio consisted of an aggregate of 2,792 MW of wind farm capacity and 1,396 WTGs.

Inox Green Energy Services Limited IPO: Services Offered

The IGESL services has be divided into two categories:

• Operation services: IGESL has a dedicated onsite O&M team to provide 24*7 operation services for their customers’ wind farms to help ensure that their WTGs are generating the highest yield possible.
• Maintenance Services: The maintenance of WTGs is generally categorized into predictive and reactive maintenance. In reactive maintenance, repairs are undertaken once a component fails, and this often results in long downtimes. In predictive maintenance, efforts are taken to detect potential component failures in advance to resolve any issues early and minimize such downtime.

Inox Green Energy Services Limited IPO: Industry Outlook

• CRISIL Research expects energy requirements to grow at 5-6% CAGR over FY22 to FY27, due to healthy economic growth and expansion of the power footprint.
• CRISIL Research expects wind energy capacity additions to grow, albeit at a slow pace over the next 5 years mostly driven by the allotment of central transmission utility-connected capacities. 
• The research firm expects capacity additions of 17-20 GW over the next five years (FY23 to FY27), entailing investments of approximately Rs 1.4 trillion over the period.

Inox Green Energy Services Limited IPO: Listed Peers

There are no listed companies in India that are comparable in all aspects of business and services that IGESL provides. 

However, several other WTG OEMs provide O&M services for the WTGs that they manufacture based on contracts for annual maintenance. Their primary competitors in this category are Siemens Gamesa Renewable Energy, S.A., Enercon GmbH, GE, and Vestas India.

In the independent service provider category that is engaged by WTG owners at the expiry of the OEM’s initial O&M on the WTGs - the competitors include Renom Energy Services LLP, SKF Ltd, Windcare India Pvt. Ltd., and Kintech Engineering.

Inox Green Energy Services Limited IPO: Financials

• The company has reported revenue of Rs 165.32 crore, Rs 172.25 crore, and Rs 172.17 crore for FY20, FY21, and FY22, respectively. There has been no significant growth in revenue during this period.
• EBITDA for FY20, FY21, and FY22 reported by the company was Rs 95.35 crore, Rs 77.27 crore, and Rs 100.26 crore, respectively. The EBITDA margin for the same period was 55.39%, 41.48%, and 52.70%, respectively.
• In the last three financial years, the company has reported losses. For FY20, FY21, and FY22, IGESL reported a loss of Rs (52.26) crore, Rs (153.52) crore, and Rs (93.20) crore, respectively. 
• For the last three financial years, the company reported average EPS and RonW of (0.78) and (21.3)%, respectively.
• The Debt to Equity ratio has increased from 0.73 in FY20 to 0.99 in FY22.

Inox Green Energy Services Limited IPO: Unique Selling Propositions

Strong and diverse existing portfolio base: The counterparties to the company's O&M contracts feature a mix of independent power producers (approximately 72%), public sector undertakings (approx 14%), and corporates (approx 14%).

Established track record and visibility for future growth: They have an established track record in the wind energy O&M industry of more than nine years due in large part to the synergistic relationship it shares with parent company, IWL.

Reliable cash flow: IGESL has entered into long-term O&M contracts with its customers, which range from five to 20 years with a renewal option provided in most cases. It gives them full revenue visibility as the price for O&M services is pre-determined for each year of the contract.

Established supply chain: They have an established relationship with their suppliers for the parts, components, and tools they require in the provision of O&M services.

Inox Green Energy Services Limited IPO: Growth Potential

Explore opportunities to expand portfolio and scale operation: They plan to grow their portfolio through the entry of new long-term O&M contracts with customers who purchase IWL’s WTGs and also provide O&M services for WTGs which are not manufactured by IWL.

Transitioning to an asset-light model: IGESL intends to transition to an asset-light model with minimal capital expenditure by reducing project bids and investments into the wind power assets of their subsidiaries.

Enhance focus on predictive maintenance over reactive maintenance: They will continue to focus their efforts on practicing predictive maintenance to avoid the negative impacts of reactive maintenance such as downtime stemming from the need to effect major service, repairs, or overhaul which translates into lost power generation and revenue for customers.

Provide analytics and asset performance forecast services: They are keen adopters of new technologies to assist them in the provision of their O&M services which ultimately helps their clients in optimizing the use of their WTG assets.

Inox Green Energy Services Limited IPO: Risks

Dependency on IWL: They are currently entirely dependent on Inox Wind Limited (Promoter) for their business and if they were to choose another service provider for the operation and maintenance services of their wind turbine generators, IGESL's business will be impacted.

Contractual obligations for the company: They have entered into a business transfer agreement by which they divested their erection, procurement, and commissioning business to one of the subsidiaries of Promoter - Resco Global Wind Services Private Limited, which imposes certain contractual obligations on the company.

Loss-making company: The company has reported losses for the last three financial years, and there is no surety when the company will turn profitable.

Inox Green Energy Services : Detailed review and Analysts' Recommendation

As of now, there are no analysts’ calls. We shall update this section soon. Stay tuned!