Highlights
| Issue Size –: 28,752,095 shares | Issue Open/Close – 21 Oct / 23 Oct, 2024 |
| Price Band (Rs.) 1427 – 1503 | Issue Size (Rs.) – 43,214 mn |
| Face Value (Rs) 10 | Lot Size (shares) 9 |
Waaree Energies Limited (WEL) incorporated on 1990, is the largest manufacturer of solar PV modules in India with the largest aggregate installed capacity of 12 GW. They commenced operations in 2007 focusing on solar PV module manufacturing with an aim to provide quality, cost effective sustainable energy solutions across markets.
Their portfolio of solar energy products consists of the following PV modules: (i) multicrystalline modules (ii) monocrystalline modules and (iii) TopCon modules, comprising flexible modules, which includes bifacial modules (Mono PERC) (framed and unframed), and building integrated photo voltaic (BIPV) modules.
WEL also included under the Approved List of Models and Manufacturers (ALMM) list identified by the Government of India, which enables them to participate in various government schemes aimed at developing the solar industry in India. They also manufacture semi-flexible solar panels for sale to global customers through their in-house research and development in product application.
Their sales and revenue channels include: (i) Direct Sales to Utilities and Enterprises (ii) Export Sales, which includes solar PV module sales to international customers as well as international EPC revenue; (iii) Retail Sales (comprising franchisee sales), which includes solar PV module sales through their extensive franchisee network focused on rooftop and MSME customer business vertical as well as franchisee EPC revenue; and (iv) Other Revenue from Operations, which includes EPC services for domestic utilities and enterprise customers, O&M services, trading in ancillary products, export incentives, generation of electricity from renewable resources and scrap sale.
Out of the total proceeds of Rs. 43,214 mn, Rs. 27,750 mn would go towards part finance the cost of establishing the 6GW of Ingot Wafer, Solar Cell and Solar PV Module manufacturing facility in Odisha, India by way of an investment in wholly owned subsidiary, Sangam Solar One Private Limited, ~Rs. 8,250 mn would use for general corporate purpose and Rs. 7,214 mn would go towards existing selling shareholders of the company.
Key Highlights
- India is forecast to almost double its renewable power capacity over 2022 to 2027, with solar PV accounting for three-quarters of this growth. At COP26, India announced its targets of achieving net zero by 2070 and 500 GW of non-fossil installed capacity by 2030. India is also focusing on domestic manufacturing of solar PV and aims to expand its module manufacturing capacity to approximately 70 GW by 2030.
- In order to backward integrate WEL operations, aimed at improved profitability and de-risking the supply chain as well as lower dependence on imported components, they propose to establish the Project. For which the company is expected to spent Rs. 89,032 mn. Out of this Rs. 89,032 mn, Rs. 27,750 funded by IPO Proceeds, Rs. 6,103 mn from existing identifiable internal accruals and Rs. 55,180 mn from project loan.
- As of now the company has solar PV module capacity of 13.3 GW and it is expected to add 6 GW (Domestic) Capacity by FY27 and 1.6 GW capacity in FY25 (United States). WEL expected to add 5.4 GW solar cell capacity in FY25 and 6 GW (Domestic) capacity by FY27. Also, they planning to add 6 GW (Domestic) ingot wafer capacity by FY27.
- WEL has a substantial order book of solar PV modules and as of Q1FY25, WEL’s pending order book of solar PV modules was 16.6 GW which included domestic orders, export orders, and franchisee orders and 3.75 GW of orders for their Subsidiary, Waaree Solar Americas Inc. located in the United States.
- The company’s key strategy includes (i) To implement strategic backward integration to enhance operations and increase profitability (ii) Maintain leadership position in the utility and enterprise modules sales market with continued capacity expansion in India and abroad (iii) Focus on technology upgrades to manufacture high quality modules (iv) Continue to grow and diversify export markets (v) Continue focus on maintaining leadership position in commercial and industrial, and residential business verticals (vi) Continue to scale operations through organic and inorganic expansion opportunities.
- Sales of the company has grown by 99.83 pct CAGR during the period FY22-24 and EBITDA and Profit grew 198.94 pct CAGR and 299.87 pct CAGR over FY22-24. During FY24, company reported sales of Rs. 113,976 mn which grew by 68.83 pct YoY while EBITDA rose by 91.67 pct YoY to Rs. 18,096 mn as EBITDA margin expanded from 13.76 pct in FY23 to 15.56 pct in FY24. As of FY24 the company reported profit of Rs. 12,744 mn which was grew by 154.73 pct YoY. AS of Q1FY25 company registered sales/EBITDA/Profit of Rs. 34,089 mn/Rs. 6,400 mn/ Rs. 4,011 mn which grew by 2.42 pct YoY/15.46 pct YoY/18.56 pct YoY.
Key Risk
- Company may face client concentration risk as half of the revenue depends on the top 5 clients.
- Major chunk of the sales comes from export sales to USA. The company is major importer of raw materials from China and US has national security issues with China and problems with forced labour, anti-dumping which might affect company’s business and financial health.
- If inflation were to rise in India, WEL might not be able to increase the prices of their services at a proportional rate thereby reducing it can add dent on their margins.
Financial Performance
| (In Rs. million otherwise stated) | FY22 | FY23 | FY24 | Q1FY24 | Q1FY25 |
| Revenue from operations | 28,543 | 67,509 | 1,13,976 | 33,283 | 34,089 |
| EBITDA | 2,025 | 9,441 | 18,096 | 5,543 | 6,400 |
| EBITDA Margin % | 6.88% | 13.76% | 15.56% | 16.23% | 18.30% |
| Profit | 797 | 5003 | 12744 | 3383 | 4011 |
| Profit Margin % | 2.70% | 7.29% | 10.96% | 9.91% | 11.47% |
| Return On Capital Employed % | 23.49% | 48.83% | 36.95% | 17.75% | 9.56% |
| Return on Equity % | 17.69% | 26.26% | 30.26% | 12.36% | 8.79% |
Peer comparison based on FY24 Financials
| Peer Comparison | Waaree Energy Limited | Websol Energy System Limited | Premier Energies Limited |
| EBITDA Margin % | 15.56% | -24.50% | 15.90% |
| PAT Margin % | 10.96% | -451.10% | 7.30% |
| ROCE % | 36.95% | -17.69% | 30.14% |
| Debt Equity Ratio % | 0.08% | 1.70% | 2.29% |
| Capacity in GW* | 12 | 0.55 | 4.13 |
| Order Book in GW* | 19.93 | NA | 54.33 |
Valuation
Waaree Energies Limited is a largest manufacturer of solar PV modules in India with the largest aggregate installed capacity of 12 GW. With their rich experience in the solar PV module manufacturing business, deep market penetration together with significant and regular capacity expansion of their solar PV module manufacturing as well as backward integration into manufacturing of solar cells, position them well to capture the growing demand for solar energy products domestically and internationally. At the upper end of the price band of Rs. 1,503 the issue is priced at a PE of ~26.9 its FY25E annualised earnings. The issue looks fully priced. One can subscribe this issue from a longer-term perspective.
Also read: Why Is Financial Advisory Important?
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