ACME Solar IPO Opens Tomorrow. Here's Everything You Need to Know

India's clean energy sector is experiencing a dynamic year in the IPO space, reflecting the nation's accelerating transition toward sustainable energy.

Prominent players such as Premier Energies and Waaree Energies have already made substantial strides, raising Rs 28.3 billion (bn) and Rs 43.2 bn, respectively, through their initial public offerings.

In the electric vehicle sector, Ola Electric joined the IPO wave earlier this year, raising Rs 61.5 bn, while Ather Energy is also expected to follow suit.

This trend underscores India's commitment to renewable energy and clean technology, attracting significant investor interest as the nation aims to meet its ambitious green energy targets.

With the renewable transition becoming a cornerstone of India's energy agenda, industry insiders expect a wave of upcoming listings from green energy companies eager to enter public markets.

Riding this momentum, ACME Solar, a major independent power producer, is set to launch its IPO this week, marking another milestone in India's clean energy growth story.

Industry Overview

The renewable energy sector is gaining momentum, with clean energy sources like solar, wind, small hydro, biomass, and bagasse leading the charge.

These energy sources are increasingly recognised for their ability to generate power without harmful pollutants, making them vital for sustainable development.

As of March 2024, India's renewable energy capacity has surged to approximately 191 GW, a significant increase from the 63 GW recorded in March 2012.

This growth reflects a broader trend toward green energy, with grid-connected renewable generation now accounting for 43% of the country's total installed generation capacity.

India's electricity demand has also seen robust growth, with a compound annual growth rate (CAGR) of around 5.0% from financial years 2018 to 2024.

This is complemented by a similar growth rate of approximately 5.1% in power availability, driven by substantial capacity additions in both generation and transmission segments.

About ACME Solar Holdings

ACME Solar Holdings Limited is a leading renewable energy IPP in India, specialising in solar, wind, hybrid, and firm dispatchable projects, developing and maintaining utility-scale projects while generating revenue from electricity sales since 2015.

ACME Solar Holdings caters to both central and state government-backed entities through 25-year power purchase agreements and generates revenue through the sale of electricity. Its projects are in Rajasthan, Gujarat, Andhra Pradesh, and Madhya Pradesh.

As of May 2024, it has an operational capacity of 1,320 MW. Under-construction projects total of 2,220 MW. These include solar, hybrid, and firm dispatchable renewable energy projects.

Further, some of the notable off-takers of the company include NHPC, NTPC, SECI, and GUVNL.

It's one of the largest independent power producers (IPP) in India. The company has recently acquired projects with a capacity of 2,080 MW including hybrid and FDRE projects.

FDRE projects provide higher tariffs and capacity utilization, enhancing capabilities and product offerings.

Key IPO Details and Structure

Here are the key details of the upcoming offering.

Issue period: 6 November 2024 to 8 November 2024

Type of issue: Book Built Issue

Price band: Rs 275-289 per share

Face value: Rs 2 per equity share

Lot size: 51 shares

Application limit: The minimum lot size for an application is 51 shares, requiring a minimum investment of Rs 14,739 for retail investors.

Tentative IPO allotment date: 11 November 2024

Tentative listing date: 13 November 2024The ACME Solar Holdings IPO is a book-built issue valued at Rs 29 bn. This offering comprises a fresh issue of 82.9 m shares, amounting to Rs 23.9 bn, alongside an offer for sale of 17.5 m shares, which is expected to raise Rs 5.1 bn.

What Do the Numbers Reveal About ACME?

ACME Solar Holdings' recent financial performance has shown a blend of growth and challenges, reflecting both market conditions and strategic shifts in its operations.

For the June 2024 quarter, the company reported revenues of Rs 3.4 bn, demonstrating its strong position in revenue generation within the renewable energy sector.

Profit After Tax (PAT) for this quarter stood at Rs 13.9 million (m), while the company's net worth reached an impressive Rs 19.4 bn.

ACME Solar Holdings' Financial Snapshot (2022-24)

Particulars	31-Mar-22	31-Mar-23	31-Mar-24
Revenues (Rs in m)	14,879.0	12,949.0	13,192.5
Revenue Growth (%)	-	12.9	1.8
Net Profit (Rs in m)	620.1	-31.7	6,982.3
Net Worth (Rs in m)	19,087.6	19,005.6	25,912.9

Data Source: Company's Draft Red Herring Prospectus (DRHP)

Revenue Trends

Over the past few years, ACME's revenue has experienced fluctuations. In FY22, it reached Rs 14,879 m but declined to Rs 12,949 m in FY23, a decrease of 12.9%.

However, in FY24, revenue rebounded slightly to Rs 13,192.5 m, marking a modest growth of 1.8% from the previous year.

This resulted in a three-year compound annual growth rate (CAGR) of approximately -5.8%.

Profitability Trends

ACME's profitability journey has been notable. In 2022, it reported a net profit of Rs 620.1 m but faced a loss of Rs 31.7 m in 2023 due to industry challenges.

The company, however, rebounded strongly in 2024, achieving a net profit of Rs 6,982.3 m.

This turnaround shows ACME's resilience in overcoming financial obstacles.

Facing the Heat: Competition and Market Position

In its Red Herring Prospectus (RHP), ACME Solar Holdings highlighted the competitive landscape, noting challenges from both local and international developers of renewable energy projects.

The company also faces rivalry from traditional energy firms, particularly utilities that rely on conventional fossil fuels.

Among its notable competitors are ReNew Power, Adani Green Energy, JSW Neo, NTPC Green Energy, Tata Power, RE Ltd, Avaada Energy, and Greenko.

ACME Solar Holdings stands out as one of the largest independent power producers (IPP) in India's renewable energy sector, specifically in solar power.

The ACME group was one of the pioneers in the solar IPP market in India, developing and commissioning a total of 2,719 MW (3,668 MWp) of solar projects since its inception.

Currently, it boasts an operational project capacity of 1,340 MW (1,826 MWp) and has additional contracted project capacity under construction totalling 3,250 MW, alongside 1,730 MW in awarded projects.

Peer Comparison

Company	Revenue from operations (Rs in million)	EPS (Basic) (in Rs)	Debt/Equity (x)	Return on Net Worth (%)
ACME Solar Holdings	13,192.5	12.6	2.7	26.9
Adani Green Energy	92,200.0	6.2	2.9	7.2
ReNew Energy Global	81,948.0	9.9	4.5	3.1

Data Source: Company's Red Herring Prospectus (RHP)

When compared to its peers, ACME demonstrates solid revenue and earnings per share.

However, Adani Green Energy boasts a higher price-to-earnings ratio and a notable return on net worth, while ReNew Energy Global PLC also exhibits strong performance metrics.

It is important to note that ACME is the smallest player among its competitors in terms of operational capacity, scale, and revenue.

Additionally, its profit margins have been influenced by the sale of exceptional items like assets.

While ACME's net debt to equity ratio appears low compared to competitors like Adani Green, indicating less leverage, it's essential for investors to consider that the company's individual debts remain high upon closer examination.

Why ACME Solar Stands Out?

What's Working:

• ACME Solar is one of seven companies vying for government contracts to manufacture advanced chemistry cells with a substantial capacity of 10 gigawatt-hours under the production-linked incentive scheme.
• The company has teamed up with Japan's IHI Corp. to establish a green ammonia plant at Gopalpur Industrial Park in Odisha, with a massive investment of Rs 600 billion.
• ACME boasts comprehensive value chain capabilities, employing an integrated approach to renewable power projects, which includes in-house project development, engineering, procurement, construction, operations, and maintenance teams.
• By managing all processes internally-from project development to operations-ACME keeps efficiency high and costs low.
• With contracts averaging nearly 19 years, ACME is positioning itself for stable, long-term revenue generation.

Challenges Ahead

• A significant portion of ACME's revenue, approximately 90%, comes from its top 10 customers, presenting a concentration risk.
• ACME Cleantech serves as the primary supplier; however, the lack of formal contracts introduces uncertainty in the supply chain.
• The company's projects are primarily located in Rajasthan, Andhra Pradesh, and Telangana, making them vulnerable to changes in state policies.
• Additionally, ACME faces hurdles with electricity grid availability and securing access to transmission lines, which could impact operational efficiency.

What Next?

Founder Manoj Upadhyay and CEO Nikhil Dhingra of ACME Solar Holdings recently discussed the company's fundraising and expansion strategies.

The fund raised will be to address the debt of its subsidiary, enabling the utilization of cash flows generated from the subsidiaries for growth initiatives.

Additionally, the company plans to allocate Rs 600 crore from the primary fundraise to cover corporate overrides and working capital needs.

The company's solar projects are primarily located in Rajasthan, selected for its high solar radiation, while wind projects are favoured in Gujarat, recognized for its optimal wind conditions.

Further, India's renewable energy sector is rapidly expanding, with total installed capacity reaching approximately 442 GW as of March 2024.

Over the past few years, the country has added nearly 98 GW, reflecting a compound annual growth rate (CAGR) of 4.3%. With an ambitious target of achieving 450 GW by 2030 in line with the Paris Agreement, the renewable energy landscape is teeming with growth opportunities.

Government initiatives, such as the Pradhan Mantri-Kusum Yojana, are significantly boosting the adoption of green energy, facilitating solar power generation for farmers and supporting decentralized energy solutions.

This positive momentum presents a fertile ground for companies like ACME Solar Holdings, positioning it to capitalise on the flourishing market and solidify their leadership in the renewable energy space.

Conclusion

ACME's upcoming IPO offers an opportunity for investors looking to tap into the renewable energy sector.

With a solid customer base and relatively few competitors in this space, the company is well-positioned to capture significant market share in the future.

ACME Solar Holdings boasts a portfolio of large-scale ongoing and awarded projects, which signals a positive outlook for investors.

The company is committed to expanding and diversifying its offerings to maintain its leadership position in the industry.

To enhance its growth trajectory, ACME plans to continue investing in its integrated business model, focusing on technological upgrades to improve project efficiency and lifespan.

Additionally, the company aims to diversify its funding sources and optimise its cost of capital by identifying strategic partners and investors for future development.

However, potential challenges such as grid availability and timely access to transmission lines may pose risks to its operations and cash flow.

Be sure to conduct thorough research before making any investment decisions. Ensure the investment aligns with your financial objectives and matches your risk tolerance.

For more information on IPOs, check out the list of upcoming IPOs.

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