Waaree Energies IPO Set for Mid-October: Key Details and Financial Insights

Waaree Energies Ltd, a prominent solar PV modules manufacturer in India and the parent company of Waaree Renewable Technologies, is gearing up for its much-anticipated IPO in mid-October, 2024. This move is expected to be a significant milestone for the company as it seeks to raise ₹ 3,000 crore through a combination of a fresh issue of shares and an Offer for Sale (OFS). The IPO is poised to attract substantial attention from both retail and institutional investors, given the company’s position in the booming renewable energy sector.

IPO Details

The company has outlined plans to raise funds through a fresh issue of shares with a face value of ₹10 per equity share, along with an OFS of up to 32 lakh equity shares. According to the Draft Red Herring Prospectus (DRHP) filed with SEBI, the OFS includes up to 27 lakh shares from Waaree Sustainable Finance Private Limited (formerly Mahavir Thermoequip Private Limited), a promoter entity, and an additional 4.5 lakh shares from Chandurkar Investments Private Limited. Furthermore, another selling shareholder, Samir Surendra Shah, will offer 50,000 shares as part of the deal.

Utilization of Proceeds

Waaree Energies intends to use the proceeds from the IPO for several key purposes, including the establishment of a new Ingot Wafer Solar Cell and Module manufacturing facility in Odisha. This is a significant step for the company as it seeks to increase its production capacity to meet growing demand in the solar energy market. The funds will also be allocated towards general corporate purposes, which will help the company strengthen its financial position and operational capabilities.

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As of June 30, 2023, Waaree Energies’ aggregate installed capacity stood at a substantial 12 GW, making it one of the leading players in India’s renewable energy sector.

Financial Performance

Waaree Energies has reported impressive financial growth over the past fiscal year. For the fiscal year ended March 31, 2023, the company’s revenue from operations skyrocketed to ₹ 6,750 crore, a sharp increase from ₹2,854 crore in FY22. This growth is a testament to the company’s strong performance in the solar energy market, driven by increasing demand for renewable energy solutions.

The company’s profit after tax saw an even more dramatic rise, surging nearly five-fold to ₹ 500.2 crore, up from ₹ 79.6 crore in FY22. This strong profitability underscores Waaree Energies’ ability to scale its operations while maintaining healthy margins. Additionally, the company remains net cash-flow positive, with ₹ 642 crore in reserves as of March 31, 2023. This solid financial footing positions Waaree well for future expansion and growth initiatives.

Customer Concentration and Export Sales

One of the key risks identified in Waaree Energies’ business model is its customer concentration. In FY22, the top 10 customers contributed 42.78% of total revenue. This concentration increased significantly in FY24, with the top 10 customers contributing 76.11% of the company’s revenue. Notably, the company’s largest customer alone accounted for around 20% of the revenue, highlighting the potential vulnerability in case of a loss of any major customer.

Waaree Energies also has a significant reliance on export sales, particularly to the United States. For Q1 FY24, export sales accounted for 73% of the company’s total revenue from operations, with a large portion of this revenue coming from the US market. The company’s DRHP outlines that export sales to the US were a critical driver of its growth, but also pose risks related to international market dynamics, currency fluctuations, and regulatory changes.

Key Risks and Challenges

While Waaree Energies has demonstrated impressive financial growth, the company faces several key risks that could impact its long-term business outlook:

• Customer Concentration Risk: As previously mentioned, the company’s reliance on a small group of customers for a significant portion of its revenue could be problematic if any of these customers were to reduce or discontinue their business relationships.
• Export Reliance: With the majority of Waaree’s sales coming from the US, the company is exposed to fluctuations in international markets. Any changes in US trade policy, import tariffs, or economic conditions could have a material impact on the company’s revenues and profitability.
• Retail Sales Expansion: The company’s ability to grow its retail sales, particularly in the commercial, industrial, and residential sectors, will depend on its ability to maintain and expand relationships with franchisees. Failure to do so could negatively affect the company’s business, cash flows, and operations.
• Regional Dependence: A significant portion of the company’s retail sales comes from the state of Gujarat. Any adverse change in demand from this region could have a negative impact on its business, financial condition, and cash flows.
• Manufacturing Expansion: Waaree is currently in the process of establishing a 3GW manufacturing facility in the United States. While this expansion is a critical part of the company’s growth strategy, any failure to properly execute this project could negatively affect its business and financial performance.

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The upcoming Waaree Energies IPO, expected to launch in mid-October, presents a significant opportunity for investors to participate in India’s rapidly growing renewable energy sector. The company’s strong financial performance, expanding manufacturing capacity, and leadership in the solar PV modules space make it an attractive investment. However, potential investors should carefully consider the risks associated with customer concentration, export reliance, and the challenges of expanding retail sales before making any investment decisions.

As Waaree Energies prepares to raise ₹3,000 crore through its IPO, the funds will play a critical role in supporting the company’s future growth initiatives, particularly its expansion into new manufacturing capabilities and geographic markets.

Investors will be closely watching the company’s performance post-IPO, as well as its ability to navigate the risks associated with its business model and competitive landscape.