Inox Wind IPO: Subscribe for good listing gains

Nirmal Bang | Jan. 4, 2013, midnight

INOX Wind Ltd. (IWL) is one of India’s leading wind power solutions providers. Being an end-to-end solutions player, IWL manufactures wind turbine generators (WTG), and provides complete turnkey services like supplying the WTGs, offering wind resource assessment services, site acquisition, infra development and operation & maintenance services.

Objects of the Issue

The issue consists of an OFS by promoter entity – Gujarat Fluorochemicals (1.0 cr shares) and fresh issue by IWL (Rs 2.2 cr shares). The net proceeds from the fresh issue (Rs 700 cr) would be utilized for (a) Expansion & Up-gradation of existing manufacturing facilities (b) Meet Long term working capital needs (c) Investment in Subsidiaries

Valuation and Recommendation

Emerging from the coffers of The Inox Group – INOX Wind, with its strong operating performance, good quality management team and in place technology tie ups could be a good proxy play on the high growth expected in the wind power space. Notwithstanding the industry woes, the company has clocked 59% CAGR in revenues and 11% CAGR in EBIDTA. FY14 was an aberration year as the margins went down to 11% on account of work done in Maharasthra where the company didn’t have its own lands hence had to incur 4% additional cost. However, the situation got normalized in 9MFY15, where the EBIDTA margins came back to company levels of 15.9% from 11.2% in FY14. Going forward, we expect IWL to maintain this high growth trajectory. The basis of our expectations stems from a healthy order backlog of 1258 MW, which could translate into incremental revenues of Rs 7,000-7,500 cr. On the operating front we are confident that the company would maintain its past performance of 16-18% EBITDA margins.

On the valuation front, the PER stands at 24.9-25.8x FY15E EPS of Rs 12.65 per share. Given the cyclical trend witnessed in the earlier quarterly results, we expect company to emulate minimum its Q3FY15 performance in Q4FY15, forming the basis of our valuation assumption. We recommend subscribing the issue as it may have good listing gains.

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