Waaree Energies files for IPO as unit’s shares soar 14 times in less than a year

Solar energy company Waaree Energies Ltd has filed its draft red herring prospectus with the Securities and Exchange Board of India to raise funds through an initial public offering (IPO).

The IPO comprises a fresh issuance of shares to raise Rs 1,350 crore and an offer for sale of 40.07 lakh shares by its promoters and other shareholders, according to the DRHP.

Waaree Energies is the majority owner of Mumbai-listed Waaree Renewable Technologies Ltd, with a 54.28% stake. The IPO filing comes at a time when Waaree Renewable’s shares have cooled off a tad after soaring this year.

Shares of Waaree Renewable, a penny stock, touched a one-year high of Rs 199.85 earlier this month but are now trading around Rs 170 apiece on the BSE. This is still a gain of 14 times from a one-year low of Rs 11.90 per share in November last year. The unit is currently valued around Rs 356 crore.

The offer for sale includes a sale of 13.15 lakh shares each by chairman Hitesh Chimanlal Doshi, director Virenkumar Chimanlal Doshi and Mahavir Thermoequip Pvt Ltd. Among other selling shareholders, Samir Surendra Shah will divest 40,000 equity shares while Nilesh Gandhi and Drasta Gandhi will jointly offload 22,500 equity shares.

The company plans to use Rs 910.3 crore out of the money to be raised from the fresh issue to set up a solar cell manufacturing facility with a capacity of 2 gigawatt a year and Rs 141.2 crore for a solar photovoltaic module manufacturing facility with a capacity of 1 GW a year in Gujarat.

Waaree Energies may also consider raising Rs 270 crore via a pre-IPO placement. If it does so, it will reduce the size of the fresh issue accordingly.

Waaree Energies’ business

It is one of the major players in the solar energy industry in India focused on PV module manufacturing, with an aggregate installed capacity of 2 GW as of March 31, 2021. Citing a CRISIL report, it said it had a market share of 24% out of total enlisted capacity for solar PV module manufacturing in India as of August 31, 2021.

The company makes PV modules using both multi-crystalline and monocrystalline cell technology. It currently operates three manufacturing facilities comprising four factories in India. These are located at Surat, Tumb and Nandigram in Gujarat. It is also setting up another manufacturing facility in Gujarat, where it is implementing its capacity expansion plans for PV modules as well as setting up of facilities for backward integration into solar cell manufacturing.

The addition of 3 GW PV module manufacturing capacity to its existing 2 GW capacity is likely to be operational by the end of 2021-22. The 4 GW solar cell manufacturing capacity is likely to be operational by the end of 2022-23.

The company provides EPC services, project development, rooftop solutions and solar water pumps. It has a presence in more than 350 locations nationally and 68 countries internationally.

Some of its key clients in the domestic utility and enterprise segment include ReNew Power, ACME, Hero Solar, Mahindra Susten, Essel Infra, AMP Energy, Sukhbir Agro Energy, Solarworld Energy and Rays Power Infra.

Waaree Energies’ financials

The company reported revenue from operations of Rs 1,952.78 crore for the year 2020-21. This was a tad lower than the revenue of Rs 1,995.78 crore in the previous year, but above Rs 1,591 crore for 2018-19.

Its EBITDA rose to Rs 125.4 crore for 2020-21 from Rs 117.8 crore the year before but fell when compared to the 2018-19 figure of Rs 165.35 crore.

Its net profit followed a similar trajectory. Net profit increased to Rs 48.19 crore for 2020-21 from Rs 39.02 crore for 2019-20 but dropped from Rs 82.3 crore for 2018-19.

Similarly, profit margins shrank, too. The EBITDA margin almost halved from 10.25% in 2018-19 to 5.83% in 2019-20, before inching up to 6.29% in 2020-21. The net profit margin narrowed from 5.11% in 2018-19 to 1.93% in 2019-20, before climbing up to 2.42% in 2020-21.