Solar is Hot. It's About to Get Hotter with the Upcoming IPO of Premier Energies

The renewable energy sector has been on a rollercoaster ride. While 2022 saw solar stocks soar, rising inflation and interest rates sent them crashing.

One thing was certain... the market's love from 'all things green' did not go unnoticed.

With Prime Minister Narendra Modi announcing ambitious solar panel rooftop manufacturing goals in 2024, investors have latched on to solar stocks despite them lacking strong fundamentals... such is the optimism surrounding these companies.

Big players and new investors are flocking to solar stocks, anticipating a bright future driven by government and multinational investments.

And if you're looking to get in early, there's a hot prospect on the horizon: Premier Energies, a solar cell company, is reportedly set to go public soon.

#1 About Premier Energies and its Upcoming IPO

Premier Energies, established in 1995, stands as a leading integrated solar cell and solar module manufacturing company, thriving on innovative technology. With backing from GEF Capital, a prominent Private Equity Investor in Washington DC, Premier Energies pioneers photovoltaic solutions.

Its state-of-the-art manufacturing units span three locations in Telangana, covering over 44.91 acres collectively.

As of 31 March 2024, the company boasts an impressive annual production capacity of 2 GW for solar cells and 3.36 GW for solar modules.

Moreover, it is currently developing additional facilities, including a Topcon Cell line and module line, spread over 75 acres, projected to further enhance its production capabilities.

The company's upcoming IPO consists of a fresh issuance of equity shares worth Rs 15 billion (bn), and an offer-for-sale (OFS) of 28.2 million (m) equity shares by the existing shareholders.

#2 Factors Setting this IPO Apart

• Premier Energies ranks as India's second-largest integrated solar cell and module manufacturer, showcasing its strong position in the thriving Indian solar market.
• The company boasts a substantial track record in solar module manufacturing, indicating its extensive experience and reliability in the sector.
• Premier Energies possesses technical expertise in solar cell line production, further solidifying its leadership in the industry.
• With a diversified customer base, the company maintains robust relationships both domestically and internationally.
• Premier Energies holds the distinction of being the largest Indian exporter of solar cells to the United States, highlighting its potential for further export growth and market expansion.

#3 A Look at its Financials

Premier Energies has demonstrated consistent growth in its top-line performance over the past few years, with revenues climbing from Rs 7,014.6 million in 2021 to Rs 14,285.3 million in 2023. This represents a commendable Compound Annual Growth Rate (CAGR) of 26.8% since FY21.

However, the company's net profit trend has been marked by volatility. While there was a reduction in net losses from 2022 to 2023, Premier Energies still faced negative profitability during these periods.

Premier Energies Financial Snapshot (2021-23)

Particulars	31-Mar-21	31-Mar-22	31-Mar-23
Revenues (Rs in m)	7,014.60	7,428.70	14,285.30
Revenue Growth (%)	-	5.9	92.3
Net Profit (Rs in m)	258.1	-144.1	-133.4
Net Worth (Rs in m)	2,208.30	3,933.90	3,819.80

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

However, the firm turned into black for the nine-month period ended December 2023, with a profit of Rs 1.3 bn on revenue of Rs 20.2 bn.

The company had an order book of Rs 53.6 bn as of March 2024, of which Rs 11.9 bn from the non-DCR solar modules segment, Rs 32.1 bn from DCR solar modules, Rs 8 bn in the solar cells division, and Rs 1.5 bn in the EPC projects.

The company intends to broaden its presence in international market.

#4 Peer Comparison

As per the company's red herring prospectus, Websol Energy is its industry peer.

Peer Comparison

Company	Total Revenue (2023) (Rs in m)	EPS (Basic) (in Rs)	Return on Net Worth (%)
Premier Energies	14,632.10	-0.4	-3.4
Websol Energy Systems	202.3	-6.3	-12.7

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

• Premier Energies reported significantly higher total revenue of Rs 14,632.1 m compared to Websol Energy Systems' revenue of Rs 202.3 m. This indicates Premier Energies' superior sales performance and larger market presence.
• Both companies reported negative EPS in 2023. However, Premier Energies' EPS of Rs (0.4) per share is comparatively better than Websol Energy Systems' EPS of Rs (6.3) per share.

#5 Risk Factors

• Premier Energies relies heavily on a limited number of customers for its revenue generation. Any loss of these key customers could significantly impact the company's financial performance.
• The company generates a substantial portion of its revenue from just two product categories: solar cells and modules. Therefore, the continued success and demand for these products are critical for sustaining its business operations.

In Conclusion

The Indian government's initiatives, such as the Production Linked Incentive (PLI) and the Solar Park Scheme, have fostered a favorable environment for solar power development and domestic manufacturing.

These measures, aimed at achieving economies of scale, cost reduction, and job creation, reflect a concerted effort to promote sustainable energy solutions.

According to forecasts for the Indian Solar Energy market, substantial growth is anticipated, with projections indicating a market size of approximately US$ 238 bn by 2030.

This growth trajectory, expected to be driven by a compound annual growth rate (CAGR) of about 40% between 2024 and 2032, underscores the immense potential of the solar energy sector in India.

Currently, India faces significant energy import dependence, with about 85% of its energy needs sourced from other countries, resulting in considerable expenditure.

By harnessing solar energy, India has the opportunity to mitigate this dependency on imports and meet its energy demands more sustainably.

For Premier Energies, as India's second-largest integrated solar cell and module manufacturer, this presents a promising growth trajectory.

By leveraging the burgeoning solar energy market and contributing to India's energy independence, Premier Energies is well-positioned to expand its market presence and contribute to the nation's renewable energy goals.

Nevertheless, it is always prudent to conduct thorough research before making any investment decisions.

Ensure that the investment aligns with your financial objectives and matches your risk tolerance level.

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

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...