The solar powerhouse in India is preparing for listing profits with a 100% gray market premium.
The biggest producer of solar modules in India, Waaree Energies, intends to raise INR4,321.4 crore to fund its growth objectives. On October 23, the IPO’s three-day public subscription period will come to an end.
Waaree Energies’ unlisted shares are selling at a substantial premium on the gray market as the company gets closer to its initial public offering (IPO), indicating strong investor interest. Market reports indicate that the current price of Waaree Energies shares is INR1,510 more than the upper price range of INR1,503 per share. Strong demand for the IPO is shown by the grey market premium (GMP) of 100.47%. Investors anticipate a high listing performance and possible gains, and a positive GMP is typically regarded as an optimistic indication.
The biggest producer of solar modules in the nation, Waaree Energies, intends to raise INR4,321.4 crore to finance its growth. On October 23, the IPO’s three-day public subscription process will end, with shares priced between INR1,427 and INR1,503. The IPO consists of an offer to sell INR0.48 crore, or INR721 crore, and a new issue of INR2.4 crore shares, totaling INR3,600 crore.
At the high end of the pricing range, Waaree Energies’ market valuation is expected to surpass INR43,179 crore after the IPO, with the promoter’s holding dropping to about 62%.
Valuation insights
A price-to-book (P/B) ratio of around 5x and a price-to-earnings (P/E) ratio of roughly 32x are anticipated for the company’s shares. The market appears to be expecting sustained robust growth and profitability in the upcoming years, based on these values. The IPO has received a “subscribe” rating from the majority of analysts and research firms, who cite its fair values and promising growth potential.
Waaree Renewable Technologies Limited (WRTL) and Waaree Technologies Limited are two subsidiaries of Waaree Energies that are already listed on the market. Waaree Energies owns 58.8% of Waaree Technologies and 74.4% of WRTL. Waree Technologies has increased by 70.68% and WRTL’s stock has increased by 498% over the last 12 months.
WRTL provides engineering, procurement, and construction (EPC) services for solar plants and is mostly engaged in solar power projects such as ground-mounted and rooftop installations. Over the past three years, its revenues have increased at a 307% CAGR, with an 87% return on equity (ROE).
Lithium-ion batteries are produced in India by Waaree Technologies. With a net loss of INR9.9 crore reported for the year ending March 2024, it is a losing business.
Plans for expansion
The parent firm, Waaree Energies, need funding to increase its capacity for manufacturing. A new, cutting-edge manufacturing facility with a 6 gigawatt (GW) capacity would be built in Odisha using the IPO funds to produce ingot wafers, solar cells, and solar PV modules. In addition, some of the money will go toward basic business objectives including R&D and working capital requirements.
Waaree Energies has 12GW of installed capacity overall as of March 31, 2024, with 43.37% of that capacity being used. The firm runs five production plants on 143.01 acres in Gujarat, including the IndoSolar facility in Noida and Surat, Tumb, Nandigram, and Chikhli.
The company’s new production plant in Odisha, which is anticipated to be put into service in FY25, will mark a significant milestone. The company’s manufacturing capacity will be greatly increased by this development, which will also assist in meeting the rising demand for renewable energy solutions in India and throughout the world.
The business has obtained a long-term leasehold stake in a piece of land in Odisha from IDCO as part of its development ambitions. In order to strengthen its backward integration process, it has also been awarded INR 1,923.24 crore for the establishment of this manufacturing unit under the PLI initiative.
Due to constraints on Chinese products, India’s exports of solar modules increased dramatically in fiscal 2023, giving Indian producers a greater market share worldwide. Waaree Energies increased its manufacturing capacity by nearly six times to 12GW between FY20 and FY24, achieving a 44% market share in solar module exports and a 21% market share domestically.
International Waters
Driven by internal accruals and external funding arrangements, Waaree Energies is also growing its manufacturing activities abroad, with ambitions to build a new 3GW production plant in the US.
At the moment, exports, mostly to the US, account for around 60% of Waaree Energies’ income. Waaree Solar Americas Inc. will run the new plant with the goal of bolstering the business’s position in the North American market and meeting the rising demand for solar energy solutions.
“A combination of internal money and external loans will be used to finance the expansion project, which is expected to cost around USD 70 million. The business stated that the finance arrangements’ precise terms were still being finalized.
The financial results
The company’s earnings are lopsided, with the top five clients making up about half of total sales. The business stated, “We do not have any customers’ consent to include their names in this Red Herring Prospectus.”
With an average return on equity (ROE) and return on capital employed (ROCE) of around 34% and 30%, respectively, throughout the fiscal years 2022–2024, the corporation has shown remarkable financial success in recent years. Consistent revenue growth of around 100% year and an outstanding net profit increase of 300% annually over the same time period support this strong profitability.
It is anticipated that India’s renewable capacity would surpass 320GW by 2029, making up over half of the country’s anticipated total capacity. By FY29, the solar PV production capacity is expected to reach 125GW, requiring INR17 lakh billion in investments for full integration. Up to 85% of India’s solar modules are now imported because of a lack of capacity for indigenous production. From FY25 to FY30, this growth is expected to create commercial possibilities totaling INR3.4 lakh crore.
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