Inox Green Energy Services IPO: All You Need To Know

Inox Green Energy Services Ltd., an arm of the Inox GFL Group, involved in the operations and maintenance of wind turbine generators, is launching its maiden issue between Nov. 11-15.

The O&M provider is raising Rs 370 crore via fresh issue, and Rs 370 crore through offer for sale. It is offering around 5.69 crore equity shares at Rs 61-65 apiece in the IPO.

The company is valued at close to Rs 1,900 crore at the upper end of the price band.

Promoters and promoter group will hold 56% of the post-offer issued, and paid-up equity share capital. The company is offering 39% of the post-offer equity capital in IPO.

The company concluded preferential allotment of equity shares worth Rs 58 crore at Rs 80.64 apiece in November-December 2021, in lieu of repayment of debt owed to the promoters on account of receipt of materials/services, etc.

IPO Details

• Duration: Nov. 11-15.

• Offer for sale: 5.69 crore shares.

• Price band: Rs 61-65 per share.

• Issue size: Fresh issue of Rs 370 crore; offer for sale of Rs 370 crore.

• Face value: Rs 10 apiece.

• Lot size: 230 shares and multiples.

• Listing on: BSE and NSE.

• Lead managers: Edelweiss, DAM Capital, Equirus, IDBI Capital, Systematix Corporate Services.

Use Of Proceeds

Repayment/prepayment of certain borrowings: Rs 260 crore.

Business

The company is one of the major wind power operation and maintenance service providers within India.

It engages in the business of 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 long-term contracts ranges between 5 to 25 years.

It has a stable annual income owing to long-term O&M contracts. It is the subsidiary of Inox Wind Ltd., part of the Inox GFL Group of companies. The company's subsidiary Nani Virani Wind Energy Pvt. is engaged in renewable energy production. The company is looking to sell 50MW capacity for around Rs 300 crore in the current fiscal.

The company has an exclusivity agreement with IWL to provide exclusive O&M services for all WTGs sold by IWL through the entry of long-term O&M contracts between the WTG purchaser and company for terms which typically range between 5 to 20 years.

Due to this exclusivity agreement, IWL’s order book is an important indicator of future revenue and growth for the company.

As of June 30, 2022, IWL had entered into binding contracts for the supply of 2 MW capacity WTGs with an aggregate capacity of 964 MW. Further, IWL had also received letters of intent, which are non-binding and therefore may not lead to execution of any form of binding contract, for its new 3.3 MW capacity WTGs with an aggregate capacity of 524.7 MW.

The company last year sold its EPC business to its promoter. The EPC business accounted for a significant portion of the losses incurred by the company in the last three years.

In addition to being the O&M provider for all IWL wind turbine generators, the company is eyeing third-party contracts in order to capture the wind energy market which is witnessing consolidation.

Financials

The company has been loss-making in the last three years. It hopes debt retirement from fresh issue proceeds and sale of the renewable arm to become net debt-free by the end of the fiscal. This would lead to reduction in interest costs and profitability going forward.

Peer Comparison

The company has no listed peers in the Indian market.

Risk Factors

• The company is currently entirely dependent on Inox Wind Ltd., its promoter for business and if IWL were to choose another service provider for operation and maintenance services, its business, financial condition and prospects may be adversely affected.

• It has entered into a business transfer agreement by which it divested erection, procurement and commissioning business to one of the subsidiaries of the promoter, Resco Global Wind Services Pvt., which imposes certain contractual obligations on the company.

• The company along with certain entities have provided security in form of pari-passu charge on movable fixed assets, guarantees and a shortfall undertaking against the term loan facilities availed by Resco Global Wind Services Pvt. Failure by Resco to repay such loan facilities could have an adverse effect on business, results of operation and financial condition.

• The sale of services may decrease in the future.

• The renewal rate of service contracts may decrease in the future and customers may move from comprehensive O&M contracts to common infrastructure O&M contracts.

• Orders in its promoter Inox Wind Ltd.’s order book may be delayed, modified or cancelled, and letters of intent may be withdrawn or may not translate to confirmed orders which may impact future O&M revenue.