Subscribe to Inox Wind IPO, recommends Motilal Oswal

Motilal Oswal has recommended to subscribe to Inox Wind (IWND) IPO. The research firm expects WTG sales of the company to increase from 330MW in FY14 to ~600MW in FY15 and 1-1.2GW in FY16.

March 18, 2015 / 10:13 IST

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Inox Wind IPO note by Motilal Oswal

Inox Wind (IWND) is India’s fourth-largest WTG manufacturer and provides turnkey solutions for wind farm projects. Contribution of group companies to revenue has declined from 100% in FY12 to 15% in FY14. Group companies now contribute just 4% to the order book. IWND has relationships with several large utilities, including Tata Power, Continuum Wind, Clean Wind Power (Hero Group), and ReNew Power; and bagged several large sized orders in FY15. Order book as at December 2014 stood at 1,258MW, and cumulative installations / supplies stood at 1,044MW.

IWND manufactures most components like nacelles, hubs, towers, and blades in-house. Expansion at MP, coupled with capacity augmentation at Gujarat, will lead to near-doubling of capacity to 1.6GW by end FY16. Project site pipeline currently stands at 4GW (for turnkey solutions) and ~INR2b is being invested to set up the power evacuation infrastructure at these facilities (to support 1GW installations). We believe this provides a robust foundation to accelerate growth.

The O&M business provides interesting opportunities, given that the supplier retains O&M on nearly 100% of the projects, and gross margins are remunerative at ~50%. Going forward, the contribution will increase meaningfully, as the installed base increases. In the WTG business, gross margins are likely to sustain at ~26% and EBITDA margins at 16-17%.

Investment view"We recommend Subscribe. We expect IWND’s WTG sales to increase from 330MW in FY14 to ~600MW in FY15 and 1-1.2GW in FY16. O&M business also provides interesting growth possibilities. Serious government intent to push renewable power is a key driver", says Motilal Oswal research report.