Inox India IPO - Outlook, Valuation, Key Strategies, Risks And More: KRChoksey

KRChoksey Report

Inox India Ltd.'s IPO size is Rs 13,864–14,593 million with a price band of Rs 627–660 per share. The company will not receive any proceeds from the offer for sale of 22,110,955 equity shares from the selling shareholders.

The primary intention of the company is to achieve the benefits of listing its equity shares on the stock exchanges.

On the upper price band of Rs 660 and earnings per share of Rs 16.8 for FY23, the price/earnings ratio stands at 39.2 times.

We are positive about the company’s outlook considering its consistent track record, strong parentage, entry barriers due to the highly regulated nature of the sector, and healthy cash generation. Therefore, we recommend rating the Inox India IPO as 'Subscribe'.

Inox India is a niche player in the manufacturing of cryogenic equipment and was the first company to design and manufacture a trailer-mounted hydrogen transport tank for ISRO. The major drivers for this company are:

1. its strong brand equity;

2. a favorable push from the government on reducing emissions;

3. consistently delivering a healthy financial performance;

4. strong research and development capabilities; and

5. a broad customer base.

Inox India is among the top 10 leading cryogenic equipment manufacturers in the world by revenue in CY22, while in India, the company is the largest company developing containers for gases and cryogenics with ~60.0% market share.

Global cryogenic demand is expected to be robust in the coming years on account of increased demand for cleaner fuels. Thus, the company is well positioned to capture this opportunity owing to its resilient in-house technology and diversified range of innovative products.

The company will continue to leverage its parent company's existing customer base and strategic support. Inox CVA is open to inorganic growth opportunities as well, which will lead to further expansion of the product range and geographical reach.

The company has also been funding its capex requirements through cash generated from operations supplemented by borrowings from banks and financial institutions.

Thus, the company has net cash as of FY23 (Rs 3,015 million) and H1 FY24 (Rs 2,216 million). The dividend payout as percent of face value has been reasonable at 550% in FY23 and H1 FY24, respectively.

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