Inox Wind (IWL) is planning it’s maiden IPO. Issue comprises of issue of ~21.5mn shares (at Rs 325) and 10mn shares via OFS to be offered by the promoters. IWL Limited would have a market capitalization of ~Rs 72bn at the higher price band of Rs 325/share. Retail Investors to benefit as there is an additional 5% (Rs 15/share) discount to the discovered/issue price.
IWL (promoted by GFL) is the 4th largest wind turbine generator (WTG) manufacturer in India with a market share of 7% in FY14. IWL’s presence across the value chain right from the manufacturing to commissioning and the O&M phase insulates it from higher business risks and supports it with strong returns ratio. IWL’s sales have grown at a CAGR of 169% to Rs 14 bn while PAT has grown by a CAGR of ~183% to Rs 1.4 bn resp. from FY11-FY14. Funds from the IPO would be used mainly for a) Expansion and up- gradation of the existing manufacturing facilities b) Long term working capital needs and c) Investment in subsidiary Inox Wind Infrastructure Services Limited (IWISL).
"At the higher price band of Rs 325, the stock is valued at ~50x its FY14 diluted EPS of Rs 6.5. We expect IWL’s sales to be ~0.85GW for FY16 & our back of the envelope calculations estimate the stock to be trading at ~11x its FY16 (E) EPS of Rs 30 and 9.7x its FY16 (E) EV/EBITDA. Given a) Robust business model and promoter group b) Return ratios and c) capex requirement of this business we believe, IWL is fairly valued. However, given the current governments thrust on renewable energy and lack of quality paper in the industry in which IWL operates, there is a high probability of listing gains. Hence, we recommend "Subscribe" on IWL IPO for short term and medium term investors", says Aditya Birla Money research report.
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