Waaree Energies Limited IPO: Check IPO Date, Lot Size, Price & Details

WAAREE ENERGIES LIMITED

Introduction:

Waaree Energies is India’s leading solar PV module manufacturer, with an installed capacity of 12 GW as of June 30, 2024. The company has achieved substantial growth in recent years, increasing its installed capacity from 4 GW in Fiscal Year 2022 to 12 GW by June 2024. Waaree Energies' solar PV modules are produced using advanced technologies, including multicrystalline and monocrystalline cell technologies, as well as emerging technologies like Tunnel Oxide Passivated Contact ( TopCon ), which reduce energy loss and improve efficiency.

As of the date of this Red Herring Prospectus, the company operates five manufacturing facilities across India, covering an area of 143.01 acres. Waaree Energies' sales and revenue streams encompass: (i) Direct Sales to Utilities and Enterprises; (ii) Export Sales, which include solar PV module sales to international customers and EPC revenue from international markets; (iii) Retail Sales (via franchisees), targeting rooftop and MSME customers through an extensive franchisee network that also generates EPC revenue; and (iv) Other Revenue from Operations, including domestic EPC services, O&M services, trading of ancillary products, export incentives, renewable energy generation, and scrap sales.

IPO Details:

Objectives of Issue:

• 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 our wholly owned subsidiary, Sangam Solar One Private Limited (“Project”);
• General Corporate Purposes.

Key Strengths:

• Diversified Revenue Mix- The company derives its revenue from three primary channels: Direct Sales to Utilities and Enterprises, Export Sales, and Retail Sales. Each channel contributes at least 20% to the total revenue, highlighting the company’s diversified income streams. This strategic diversification enables the company to capitalize on high-margin export operations while simultaneously strengthening its domestic footprint through retail sales.
• Backward Integration – The company's backward integration strategy has significantly bolstered its operational efficiency and profitability. By adopting this approach, the company gains control over material quality and availability, which strengthens its position to negotiate more favorable pricing with customers.
• Strong Order Book- The corporation has a 16.66 GW order book as of June 30, 2024, which will be completed over time. The company's order book has grown at a CAGR of 146% over the past two years. The expanding order book presents excellent opportunities for the business, as over 50% of the capacity remains unused.

Risks:

• Export Dependency and Potential Trade Challenges– Over 50% of the company’s revenue is generated from exports, with more than 95% of these exports directed to the United States. To support its production, the company plans to source raw materials both in-house and from Southeast Asia. However, the U.S. has previously imposed significant anti-dumping and anti-subsidy duties on solar products from China, with potential anti-circumvention duties reaching as high as 254%, which could substantially impact the company’s profitability. Additionally, these raw materials may also face high import duties from the Indian government as it aims to protect the domestic industry.

• Concentrated Manufacturing Facility- Four of the five production plants are in Gujarat as of the Red Herring Prospectus date. Any disturbance in the area could have several effects on the company's manufacturing capacity, endangering its profitability. Additionally, Gujarat accounts for 30% of retail sales, which make up 15% of the company's income; hence, any disruption in the region may have an impact on sales.

• Dependency on Regulatory and Policy Environment: The company business relies on policies from the Government of India and various state governments that support renewable energy, especially solar energy, by providing incentives that enhance the feasibility of solar projects. These incentives drive solar energy generation and sales, with ongoing legislative developments potentially increasing demand for renewable energy. It benefits from several government incentives related to renewable power generation and transmission. However, any changes in these policies that restrict renewable energy production could adversely affect its business. Reduced government support for solar energy projects may lead to higher financing costs, impacting the viability of solar modules and potentially harming our financial performance. Continued governmental support is essential for maintaining positive business prospects in the renewable

Financial Snapshot:

Interest Coverage Ratio – Interest Coverage Ratio determines the ability of a company to fulfill its interest obligations. It is a ratio that compares company earnings (before interest and taxes) to interest expenses. Essentially, it shows how many times a company can pay its interest charges using its operating profit. A higher ICR suggests a company is in a good financial position to handle its debt, while a lower ICR could signal potential financial difficulties.

Debt to Equity Ratio - The debt-to-equity (D/E) ratio is used to evaluate a company’s financial leverage and is calculated by dividing a company’s total liabilities by its shareholder equity. It is a measure of the degree to which a company is financing its operations with debt rather than its own resources.

KPI comparison with Industry Peers

Conclusion:

Considering a comparative analysis over the past three years, Waaree Energies has consistently outpaced its industry peers in several key performance metrics. These include robust revenue growth, superior EBITDA and PAT margins, higher returns on capital, and a lower debt-to-equity ratio, highlighting its operational efficiency and financial resilience.

When examining valuation metrics such as the Price-to-Earnings (P/E) and Price-to-Book (P/B) ratios, Waaree appears relatively undervalued compared to its competitors. Given the promising growth potential of the renewable energy sector, with solar power positioned as a crucial component, Waaree Energies presents a compelling case for long-term investment.