Inox Green Energy Services, the wind power operation and maintenance service provider is unlikely to make investors happy on its debut on the bourses on November 23 despite a positive trend in equity markets, say most analysts.
The muted response to its public issue, dependency for orders on its parent company Inox Wind and tepid financial performance are expected to weigh on its listing performance. The debut price could be on a par with or at discount for Inox Green, they said.
Its initial public offering (IPO) got a muted response from investors, barring qualified institutional buyers with 1.05 times subscription. Retail investors bought 4.7 times the allotted quota but high net-worth individuals subscribed only about 50 percent of the portion reserved for them. The overall offer was subscribed 1.55 times.
“Inox Green Energy Services IPO received a tepid response in the market mainly due to lack of investors’ confidence amid difficult operations in the segment, muted financial performance and high dependence on the parent company,” said Ravi Singh, vice-president and head of research at online broking firm Share India.
He expects the IPO to list with a discount of 3-5 percent to its final issue price of Rs 65 a share.
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Inox Green shares traded at 1-2 percent discount to the issue price in the grey market or unlisted market, analysts said. Generally, investors look to the grey market, an unofficial trading platform, for cues on the expected listing price performance.
“Despite positive trends in the broader market, the Inox Green Energy offer failed to draw investors’ interest for subscribing to the IPO which can be the reason for subdued interest in the grey market,” said Prashanth Tapse, senior vice-president, research, at Mehta Equities, an online brokerage.
Overall, considering the weak response from investors and underperformance amid stiff challenges in the sector due to it being highly capital intensive, and with a lack of a wow factor in its business model, the listing may be on a par with or at a discount to the issue price, Tapse said.
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The subsidiary of wind turbine generator manufacturer Inox Wind raised Rs 740 crore through the IPO, which was a fresh issue of Rs 370 crore and an offer for sale of Rs 370 crore by Inox Wind.
The fresh issue proceeds will be utilised mainly for repaying debt. As of FY22, its gross debt was more than Rs 900 crore.
Inox Green Energy enjoys synergistic benefits as a subsidiary of Inox Wind. With a presence in Gujarat, Rajasthan, Maharashtra, Madhya Pradesh, Karnataka, Andhra Pradesh, Kerala and Tamil Nadu, it provides exclusive operation and maintenance services for all wind turbine generators (WTG) sold by Inox Wind through long-term operation and maintenance contracts between the WTG purchaser and Inox Wind.
As of June 2022, its operation and maintenance services portfolio consisted of an aggregate 2,792 MW of wind farm capacity and 1,396 WTGs. Of the 2,792 MW capacity, 1,964 MW was attributable to the contracts for comprehensive O&M services while 828 MW was attributable to the common infrastructure O&M contracts.
Inox Green recorded a compound annual growth rate growth of 4 percent in revenue during FY20-FY22 while EBITDA (earnings before interest, taxes, depreciation and amortisation) dropped to Rs 82.2 crore in FY22 from Rs 88.3 crore in FY20. The operating profit margin dropped to 47.7 percent in FY22 from 53.4 percent in FY20.
The company narrowed its net loss to Rs 5 crore in FY22 from Rs 27.7 crore in FY20. For the quarter ended June FY23, the company posted a loss of Rs 11.6 crore on revenue of Rs 61.8 crore.
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