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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%.

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