What you must know about Oriana Power IPO

Oriana Power Ltd, is an SME IPO on the NSE which is opening for subscription on 01st August 2023. The company, Oriana Power Ltd, was incorporated in in the year 2013 to provide total solar energy solutions. These services are offered to commercial and industrial customers. This not only is what the world is moving towards but presence in the alternate energy also enhances the valuation of companies.

Oriana Power Ltd offers low carbon energy solutions to its customers which include on-site solar project installation, rooftop and ground mounted system, and off-site solar farms. Oriana Power Ltd has a capex arm and also a services arm. The capex arm entails the engineering, procurement, construction (EPC) as well as the operation of solar projects. The services arm offers solar energy solutions on a Build, Own, Operate and Transfer (BOOT) model.

Key terms of Oriana Power IPO

Here are some of the highlights of the Oriana Power IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 01st August 2023 and closes for subscription on 03rd August 2023; both days inclusive.
   
• The company stock has a face value of ₹10 per share and the IPO issue will be a book built issue. The price band has been fixed in the range of ₹115 to ₹118 per share. For all our analysis in this IPO report, we will use the upper end of band as the benchmark.
   
• The entire issue is a fresh issue of shares. The company will issue a total of 50.556 lakh shares, which at the upper end of the price band of ₹118 per share aggregates to a total fund raising of ₹59.66 crore.
   
• There is no offer for sale (OFS) component in the IPO. As a result, the total fresh issue of the IPO is also equivalent to the total issue size. It may be recollected that fresh issue of shares is EPS dilutive and also capital dilutive.
   
• Like every SME IPO, this issue also has a marketing making portion with a market maker portion allocation carved out of the issue. The market making portion is for 255,600 shares and Share India Securities Ltd will act as the market maker for the issue. The market maker to the issue will provide two-way quotes to ensure liquidity on the counter.
   
• The company has been promoted by Anirudh Saraswat, Rupal Gupta, and Parveen Kumar and the promoter stake in the company stands currently at 83.40%. Post the IPO, being a fresh issue of shares, the promoter stake will be get diluted to 61.41%.
   
• The fresh issue funds will be used for capital expenditure including investment in plant and technology; investment in subsidiary companies as well as for funding the gaps in the working capital of the company.
   
• While Corporate Capital Ventures Private Ltd will be the lead manager to the issue, Skyline Financial Services Private Ltd will be the registrar to the issue. Post the issue, the issued capital base will expand from 141.27 lakh shares to 191.83 lakh shares.

The company has allocated 50% of the issue size for the QIB investors, 35% for the retail investors while the balance 15% is allocated to HNI / NII investors. This will be as a percentage of the net issue after the anchor portion is removed from the total issue size. The table below captures the IPO reservation for Oriana Power Ltd.

The minimum lot size for the IPO investment will be 1,200 shares. Thus, retail investors can invest a minimum of ₹141,600 (1,200 x ₹118 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 2,400 shares and having a minimum lot value of ₹283,200. There is no upper limit on what the HNI / NII investors can apply for. The table below captures the break-up in detail.

Key dates to be aware of in the Oriana Power IPO (SME)

The SME IPO of Oriana Power Ltd IPO opens on Tuesday, August 01st, 2023 and closes on Thursday August 03rd, 2023. The Oriana Power Ltd IPO bid date is from August 01st, 2023 10.00 AM to August 03rd 2023, 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is the 03rd of August 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of Oriana Power Ltd

The table below captures the key financials of Oriana Power Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

The profit margins have fairly robust at around 9.5% in the latest year and at much higher levels in previous years. Even the return on equity has been in excess of 30% in all the three years, which paves the way for more attractive valuations for the company. While sales growth has been robust, the profit growth has also been very impressive. Investors must remember that this is a traditionally high margin business despite a lot of investments having to be front-ended. However, the company can take solace from its impressive asset turnover ratio as a measure of asset sweating, which is around the 2X levels.

The weighted average EPS of the company for the last 3 years is around ₹20.85 and that makes the company very attractively valued at the upper band of ₹118 per share. In terms of valuation, the stock valuation is less than 5 times forward earnings, so it is not too expensive. However, this is a business that is about implementation and there are big names with large balance sheets already foraying into this business. Oriana Power Ltd is likely to see stiff competition so this for the investors with a longer term time frame and higher risk taking ability.