IPO Bound-Waaree Energies Eyes 300-Basis-Point Margin Uptick From Capacity Additions

Waaree Energies Ltd. aims for about a 300-basis-point increase in its margins once it becomes a fully integrated manufacturing company, which it aims to be by financial year 2027, according to top executives.

The focus of the parent entity of the listed company, Waaree Renewable Technologies Ltd., remains on cost management. For the March quarter, the company had a margin of over 15% and for the June quarter, it was over 18%, Chief Financial Officer Sonal Shrivastava told NDTV Profit in an interview on Wednesday.

The solar photovoltaic module manufacturer is flexible in terms of how the modules are sourced, she said. "We are also going to have an advantage as our own cell capacities come into play, which will secure our costs as well as supply-chain issues."

In the past, the margins have ranged between 15% and 18% and with their own backward integration, the company expects this to go up, Shrivastava said. "As we have more efficiency coming into our own module production, we can expect that (margins) to expand." Broadly, about 300 basis points is what the IPO-bound company will expect.

The initial public offering of Waaree Energies will open for bidding next week at a price band of Rs 1,427 to Rs 1,503 per share.

The IPO of Waaree Energies is a mix of a fresh issue of shares worth Rs 3,600 crore and an offer for sale for 48 lakh shares of a face value of Rs 10 each. The issue opens for subscription on Oct. 21 and will close on Oct. 23. The anchor-book issue will be open for subscription on Oct. 18.

The majority of the proceeds from the IPO will be used to partly finance the cost of establishing the company's 6 GW ingot wafer, solar cell and solar PV module manufacturing facility in Odisha, as per the red herring prospectus.

The capital expenditure for its capacity additions is spread over two years. The company will use the IPO money partly and has tied up a debt line of about Rs 5,000 crore. It will also use internal accruals, Shrivastava said. "We will see how much we will draw down over the two years. I would envisage our peak debt to be in line with our past numbers."

Customers are looking for solar cells made outside one or two supply channels. A huge portion of the demand is coming from government initiatives, according to Hitesh Chimanlal Doshi, chairperson and managing director of Waaree Energies.

Manufacturing cells in India will not only give margins but will also give clear-cut visibility of the market and will be able to offer the product to meet customers, Doshi said.