GK Energy IPO subscribed 3x on Day 1: Should you apply?

GK Energy IPO Day 1

The initial public offering of GK Energy opened for public bidding on September 19. The Rs 464-crore issue got subscribed nearly three times its offer size.

The IPO received bids for over 5.7 crore shares, as against the offer size of 2.22 crore shares, according to data on NSE. The portions reserved for retail investors and Non Institutional Investors (NII) have been booked nearly three times their allotted quota, while that for and Qualified Institutional Buyers (QIB) has been subscribed two times.

GK Energy IPO GMP:

Ahead of listing, the unlisted shares of the company were trading with nearly 20 percent grey market premium (GMP) over the IPO price, according to data on Investorgain. According to IPO Watch, the unlisted shares of the company were trading with more than 24 percent GMP over the IPO price.

Key things to know about GK Energy IPO:

The EPC player moved to the capital markets to raise Rs 464 crore through a fresh issue of Rs 400 crore and an offer-for-sale (OFS) of 42 lakh shares by promoters Gopal Rajaram Kabra and Mehul Ajit Shah. The IPO will remain open for public bidding between September 19 and September 23 at a price band of Rs 145-153 per share.

Investors can bid for a minimum of 98 shares as part of a lot, requiring an investment of Rs 14,994 at the upper price band, and in multiples thereafter. The allotments will likely be finalized by September 24, and the shares are scheduled to be debuted on stock exchanges on September 26.

The offer is being made through the book-building process. Around 50 percent of the net offer is allocated to qualified institutional buyers (QIB), while 15 percent and 35 percent of the offer is assigned to non-institutional bidders and retail individual bidders respectively. IIFL Capital Services and HDFC Bank are managing the GK Energy IPO.

Should you apply?

Angel One in its latest note advised investors to subscribe to the issue. The domestic brokerage noted that the Indian solar pump industry is expected to witness robust growth, driven by supportive government policies such as the PM-KUSUM scheme and various state-level solar initiatives.

At the upper price band of Rs 153 per share, GK Energy is attractively valued, trading at a post-IPO P/E of 23.3x lower than its industry peers, Angel One said. “The company has demonstrated strong financial performance, with significant revenue and PAT growth in FY 2024. Its robust order book and presence in the growing renewable energy sector further support its growth prospects,” it added.

"GK energy is expected to open with a premium to its upper price band of 153 primarily due to the premium that the renewable sector is commanding and the strong operational performance and growth shown by them. In addition, at a P/E of ~24 its lower than most listed peers pointing to attractive valuations. This is also seen in the GMP of close to 30% it is commanding," said Shravan Shetty, Managing Director, Primus Partners.

The company is well poised for growth as it is one of the key players in the solar EPC space, Canara Bank Securities said in a note. At the upper end of its price band of Rs 153, GK Energy's financial year 2025 price-to-earnings ratio appears reasonably valued compared with its peers, analysts at Geojit Investments said. "With strong execution capabilities and government-backed demand, GK Energy is poised for sustained growth," Geojit said, assigning a 'Subscribe' rating to the issue for investors with a medium- to long-term horizon.

"Industry reports estimate the market size of solar pumps in India to cross Rs 1 trillion by 2027, growing at a CAGR of over 20% between FY24 and FY27.GK Energy is well-positioned to capture this growth and replicate its success in Maharashtra across the high-potential states of Haryana, Rajasthan, Uttar Pradesh, and Madhya Pradesh. The company is also diversifying its revenue sources by installing rooftop solar systems and plans to backward integration by manufacturing its own solar panels. Investors can consider the IPO for long-term investment," said Master Capital Services.

About the company:

The company offers farmers solution for survey, supply, installation and maintenance of solar-powered pump systems. GK Energy intends to spend Rs 322.5 crore of fresh issue proceeds for long-term working capital requirements and the remaining for general corporate purposes. Half of the public issue portion is reserved for qualified institutional buyers, 35 percent for retail investors and 15 percent for non-institutional investors.

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