Inox Green Energy IPO: 5 Things to Know

The Inox group is one of the most popular movie theatre chains in India. With its state-of-the-art theatres, the group has set new benchmarks for cinema viewing.

After years of stellar performance in the multiplex sector, Inox is making its move in the green energy sector. The group is going public with its green energy arm - Inox Green Energy Services this week.

Before deciding whether you should apply for this IPO or not, check out the five important details we have highlighted in this article about Inox Green Energy Services.

The green energy company's IPO will open for subscription on 11 November 2022. Here are the key details.

Issue period: 11 November 2022 to 15 November 2022

Issue size: Rs 7.4 bn (offer for sale for Rs 7.1 bn)

Price band: Rs 61 to Rs 65 per equity share

Bid lot: 230 shares and multiple thereof

Application limit: Minimum one lot maximum thirteen lots

Face value: Rs 10 per equity share

Grey market premium (GMP): Rs 11 (as of 9 November 2022)

The company has reserved not less than 75% shares of the offer for qualified institutional buyers (QIB). It has reserved not less than 15% for non-institutional buyers (HNI). Hence not more than 10% of shares are available for retail individual investors.

Tentative IPO allotment date: 18 November 2022

Tentative listing date: 23 November 2022

#1 About the company

Incorporated in 2012, Inox Green Energy Services is one of the major wind power operation and maintenance (O&M) service providers within India. The company is a subsidiary of Inox Wind (IWL), a company which is listed, and part of the Inox-GFL group of companies.

Inox Green Energy 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 itself for terms which typically range between 5 to 20 years.

The company has a presence in Gujarat, Rajasthan, Maharashtra, Madhya Pradesh, Karnataka, Andhra Pradesh, Kerela, and Tamil Nadu.

#2 Financial position

The financial position of the company is not good. Investors should consider this factor more importantly because in the past, there have been instances where people ignored the financials as the company came from a hot evergreen sector like green energy.

In financial year 2021-22, Inox Green Energy saw a mere 2.1% growth in revenues.

The company is running deep in losses on account of high expenses. Even the return on net worth is negative.

Financial snapshot

Particulars	31-Mar-22	31-Mar-21	31-Mar-20
Revenues (Rs m)	1902.3	1862.4	1721.6
Revenue Growth (%)	2.10%	8.20%
Expenditure Before Tax	1949.4	1996.4	1696.4
% of Total Income	102.5	107.2	98.5
Net Profit	-932	-1535.2	-522.6
Net Profit Margin (%)	-49	-82.4	-30.4
Net Worth	8066.3	429.6	966.2
Return on Net Worth (%)	-0.6	-64.5	1.7
Basic Earnings per share (Rs)	-4.5	-10.4	-6.5

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

#3 Peer comparison

According to the red herring prospectus of the company, there are no listed companies in India that are comparable in all aspects of business and services that the company provides. Hence, it is not possible to provide an industry comparison in relation to the company.

#4 Arguments in favour of the business

It has a strong and diverse existing portfolio base.

It has a favourable national policy support and visibility for future growth.

It has an established supply chain in place.

It has a strong and experienced management team.

#5 Risk factors

Very poor financial performance.

It is completely dependent on its parent company for business.

It is highly indebted.

Inadequate insurance coverage.

It has loss-making subsidiaries.

Grey Market Premium

Ahead of its issue, the grey market premium of Inox Green Energy rose to Rs 11.

A day earlier, the GMP was Rs 7.

The grey market is an unofficial market that exists in parallel with the official market. In the context of IPOs, the grey market is where unlisted IPO shares are traded.

It is here, at least in some portion, that the IPO punters get their kicks. And they get it by tracking what's called the IPO GMP.

The grey market premium or GMP is the amount, over and above the issue price, that traders are willing to pay or ask for to trade these yet to be listed IPO shares.

To conclude

In Inox Green's IPO, consider buying a stock like marrying the company. Just like a spouse cannot be selected because he/she looks good, one cannot buy a stock because its group companies are doing well.

Traditionally, a girl was advised to not marry a guy if the guy does not have a financial standing of his own.

The reason was simple. Even if the guy is currently doing well financially on the family money, the future is uncertain. One cannot most assuredly say that the guy can earn well if need be.

Inox Green Energy is like the guy here. It is heavily dependent on its promoter company. In fact, it's financially weak even after depending on its parents.

Hence, in times when even fundamentally strong stocks were knocked down by the punch of global downfall, does it make sense to invest in a loss-making company?

A loss-making company which has high debt.

However, it cannot be ignored that the wind energy sector is booming lately, because of the increasing focus on eco-friendly technology.

If the company does execute contracts on time, its performance could improve over the medium term. Inox Green has to execute and launch 3.3 MW turbines in financial year 2022-2023. The company has received an order for turbines of 350 MW (150 MW + 200 MW) from NTPC Renewable Energy.

Stay tuned to get further updates on this IPO and all upcoming IPOs in the market.

Happy Investing!

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...