Waaree Energies IPO: Should You Apply?

In the quest for sustainable energy solutions, the solar energy sector has emerged as a beacon of hope, promising not only a cleaner environment but also the potential to power homes and industries with abundant, free electricity.

At the heart of this growth are the top-notch solar panel manufacturing companies. As the global demand for clean energy surges, the quality and reliability of solar panels has become a crucial factor in determining the success of this transition.

India, blessed with abundant sunlight and a growing appetite for renewable energy, is making significant strides in this field.

The Surge in Solar Capacity

India's solar power capacity has grown exponentially in recent years, surpassing 60 GW by 2023. The country's focus on expanding its renewable energy infrastructure is backed by various government policies, including the Production Linked Incentive (PLI) scheme and other subsidies for solar power projects.

The Solar Park Scheme, aimed at creating large solar power projects, is also accelerating the development of the sector.

As solar energy becomes a crucial part of India's energy mix, companies operating in this domain are experiencing significant growth.

For investors eyeing opportunities in the solar space, Waaree Energies, a formidable solar panel manufacturer set for a market debut.

Inside Look at Waaree Energies Business

Founded in 1989, Waaree Energies offers a comprehensive range of solar solutions, including modules, inverters, batteries, and solar rooftops.

The company manufactures solar PV modules using multi-crystalline cell technology, monocrystalline cell technology and new technologies such as Tunnel Oxide Passivated Contact (TopCon).

The company also manufactures semi-flexible solar panels for global customers. The company's sales and revenue channels include direct sales to enterprises.

Its international operations include sales to international customers and Engineering, Procurement, and Construction (EPC) revenue from foreign clients. The company also undertakes retail sales through its extensive franchisee network focused on rooftop and MSME customer businesses as well as franchisee EPC revenue.

Additionally, the company also provides EPC services for domestic utilities and enterprise customers.

As a vertically integrated company, Waaree has expanded its manufacturing capabilities by acquiring Indo Solar, which has increased its capacity to 5.4 GW.

Waaree Energies' upcoming IPO is generating significant buzz in the market.

What's So Special About Waaree Energies?

As India's largest solar module manufacturer, Waaree Energies operates at an impressive 12 GW production capacity, supported by four manufacturing facilities.

Its vast presence, spanning 388 locations across India and 68 international markets, underscores its market dominance.

In fiscal 2024, the company recorded the second-highest operating income among India's domestic solar PV module manufacturers, highlighting its solid financial performance.

It has a diversified base of global and Indian customers with an extensive pan-India network.

Waaree's robust order book, standing at 16.6 GW as of June 2024, includes domestic, export, and franchisee orders, along with 3.75 GW in orders for its US subsidiary, Waaree Solar Americas Inc. This substantial pipeline positions the company for significant future growth, making its IPO a standout opportunity in the solar sector.

Key IPO Details and Structure

Here are the key details of the upcoming IPO.

Issue period: 21 October 2024 to 23 October 2024

Type of issue: Book Built Issue

Price band: Rs 1,427-1,503 per share

Face value: Rs 10 per equity share

Lot size: 9 shares

Application limit: The minimum lot size for an application is 9 shares, requiring a minimum investment of Rs 13,527 for retail investors.

Tentative IPO allotment date: 24 October 2024

Tentative listing date: 28 October 2024

The IPO of Waaree Energies is a mix of a fresh issue of shares worth Rs 36 bn and an offer for sale for 4.8 m shares of a face value of Rs 10 each.

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 (RHP).

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 50 bn. It will also use internal accruals.

The anchor investor portion will have a lock-in period for any equity shares allotted to anchor investors. This lock-in period will include 50% of the allotted equity shares for 90 days from the date of allotment, and the remaining 50% for 30 days from the date of allotment for each of the anchor investors.

A Close Look at Financials

For the June 2024 quarter, Waaree Energies reported revenue of Rs 34.9 bn, with a net profit of Rs 4 bn.

The company's net worth at the close of this quarter was Rs 44.7 bn.

In FY24, Waaree Energies experienced substantial growth, with revenue surging over 69% to Rs 116.3 bn, up from Rs 68.6 bn in FY23. The company's net profit also saw a significant increase of more than 154%, reaching Rs 12.7 bn compared to Rs 5 bn in FY23.

Additionally, Waaree Energies' net worth climbed over 123%, rising to Rs 40.7 bn from Rs 18.3 bn the previous year. The company has demonstrated revenue growth of 58.7% on a compounded annual growth rate (CAGR) basis over the period spanning from the financial years 2022 to 2024.

This performance can be credited to the growing customer base and a continuous growing demand.

While there was a good increase in revenue, the net profit of the company also increased from Rs 0.8 bn in March 2022 to Rs 12.7 bn in March 2024, at a CAGR of 151%.

Waaree Energies' Financial Snapshot (2022-24)

Particulars	31-Mar-22	31-Mar-23	31-Mar-24
Revenues (Rs in bn)	28.5	67.5	113.9
Revenue Growth (%)	46.1	136.5	68.7
Net Profit (Rs in bn)	0.8	5.0	12.7
Net Profit Margin (%)	2.7	7.3	10.9
Net Worth (Rs in bn)	4.2	18.2	40.7

Data Source: Equitymaster, Red Herring Prospectus (RHP)

The company maintains approximately Rs 3.6 bn in debt, with an average borrowing cost of 10% from the Indian Renewable Energy Development Agency (IREDA) and 6% for buyer credits. Its cash and cash equivalents stand at Rs 36 bn.

Competitive Landscape

Waaree Energies operates with a robust presence in the solar manufacturing sector, boasting four manufacturing factories in Gujarat and 16 years of experience in photovoltaic (PV) module production.

As of September 2024, the company commands a significant market share of 21.1% in terms of total enlisted capacity, according to the ALMM list.

Waaree Energies faces competition from leading unlisted companies such as Tata Power Solar Systems, Vikram Solar, and Adani Mundra Solar. These companies are prominent players in the renewable energy sector.

Waaree Energies manufactures both mono-crystalline and multi-crystalline solar modules, distinguishing itself from its competitors.

Although there are no other listed companies in India that engage in a similar portfolio of business, two listed firms Websol Energy and Premier Energies focus exclusively on the production of multi-crystalline solar modules.

Peer Comparison

Company	Total Revenue (Rs in million)	Return on Net Worth (%)
Waaree Energies	116,327.60	30.4
Websol Energy	268.1	NA
Premier Energies	31,713.10	14.6

Data Source: Waaree Energies' RHP

Among them, Waaree Energies significantly outperforms with significantly higher revenue and return on net worth compared to its peers.

While Websol Energy's financial performance is negligible, Premier Energies has a lower return on net worth.

This reinforces Waaree Energies' strong market position and superior financial health in the solar module industry.

Waaree Energies Grey Market Premium (GMP)

Market sources indicate that Waaree Energies' IPO has already created excitement in the market, with the shares commanding a grey market premium (GMP) of Rs 1,545 over the upper price band, representing a premium of 102.79%. This strong GMP indicates positive market sentiment and high expectations for listing gains.

The backing of well-known investors such as Madhusudan Kela, who holds a 1.28% stake in the company, is further adding to the credibility of Waaree Energies.

Some Risks to Consider

While Waaree Energies appears poised for growth, potential investors should be aware of several risks.

The company's heavy reliance on export sales exposes it to the uncertainties of international markets, particularly in the United States.

Furthermore, its growth in the commercial, industrial, and residential segments depends significantly on maintaining robust relationships with franchisees; any challenges in this area could impede expansion.

The company also sources some raw materials from China, which means that potential import restrictions or tariffs could adversely affect operations.

Additionally, disruptions in the supply chain or fluctuations in prices from third-party suppliers may negatively impact its manufacturing capabilities.

Ambitious Global Expansion Plan

Waaree Energies is strategically positioning itself to expand its global presence, targeting markets in the European Union and the Middle East, building on its current operations in the United States.

As part of this growth strategy, the company is establishing a significant 3-gigawatt solar module manufacturing facility in the US, with an expectation that 1.6 gigawatts of this capacity will be operational by March 2025.

According to Chief Executive Officer Amit Paithankar, the plant is designed to accommodate up to 5 gigawatts depending on market conditions, with raw materials sourced from India.

To capitalize on the increasing global demand for renewable energy, Waaree Energies is enhancing its integrated module manufacturing capacity in India. The company has already established an office in Dubai to facilitate its expansion into international markets.

Currently, Waaree Energies boasts a solar module manufacturing capacity of 13.3 gigawatts, which it aims to increase to 21 gigawatts by 2027.

Conclusion

Waaree Energies plans to commission 5.4 gigawatts of solar cell manufacturing capacity in Chikhli, Gujarat, by March next year.

Additionally, it aims to establish an integrated solar manufacturing capacity of 6 gigawatts for ingots, wafers, cells, and modules in Odisha, with a Rs 90 bn capital investment over the next two years.

These initiatives will further strengthen its leadership in the renewable energy sector.

The growing demand for solar cells outside traditional supply chains, driven by government initiatives, is set to enhance Waaree's position. Moreover, the China Plus One strategy is gaining momentum in the solar industry as companies seek to diversify their supply chains, moving away from China.

Rising labour costs, increasing regulatory complexities, and political risks in China have accelerated this shift. Countries like India, Vietnam, Malaysia, and Thailand offer lower labour costs, favourable government policies, and new market access, making them attractive alternatives.

India stands out due to its low labour costs and supportive regulatory environment for solar manufacturing.

As the largest solar photovoltaic (PV) module manufacturer in India, Waaree Energies is well-positioned to capitalize on these trends and continue its growth trajectory.

However, investors should conduct thorough research to ensure the investment aligns with their financial goals and risk tolerance levels.

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

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...