Prospectus disclosures are not sacrosanct for the Jains of Inox-GFL who have insatiable appetite for public funds!

If a promoter had inflicted a whopping capital loss of 95% on the investing public in the previous IPO it should have been the main risk factor in the offer document of any subsequent issue floated by the same promoter. But, unfortunately, in the so called `disclosure era’, Sebi has failed to enforce the disclosure of Inox Wind’s dismal record in the IPO document of its subsidiary.   

Inox Wind Ltd (IWL) floated an IPO of more than Rs 1020 Cr in March 2015, offering Rs 10 paid up shares at a price of Rs 325 a piece. The company justified the IPO price claiming that its weighted average earnings per share for last three  years was around Rs 8 and for the latest 9-month-period the EPS was Rs 9.88. The IPO was a grand success with 18 times over-subscription.

Come post IPO. For fiscal 2016, the company posted record revenue and profit of Rs 4414 Cr and Rs 452 Cr respectively and the stock scaled a peak of Rs 495 in the secondary market. However, that was also the end of the bull-run for the stock!

In the very next year, operating performance took a downturn and the stock lost more than 33%. Since fiscal 2018 IWL has been posting losses and the stock price hit a bottom of Rs 16 in fiscal 2020 inflicting a whopping capital loss of 95% on the IPO investors.

Operationally, the company’s loss is mounting up while revenue has been declining since fiscal 2020. In contrast to the company’s working results, the stock price has looked up in 2021/2022 obviously to boost the sentiment for the subsidiary’s IPO. Even at the current price, IWL’s 2015-IPO investors are still at a loss of over 56%.

At the time of going public IWL was presented as one of India’s leading integrated wind power solutions providers. The company claimed to manufacture wind turbine generators (WTG) and provide turnkey solutions by supplying WTGs and offering services including wind resource assessment, site acquisition, infrastructure development, erection and commissioning, and also long term operations and maintenance of wind mills. Post IPO, IWL has retained only the WTG business and transferred the other two business verticals to group companies.

What’s more, at the time of IWL’s IPO they presented the widely-held listed company Gujarat Flourochemicals Ltd as the promoter with 63% stake. But, now a closely-held company of the promoters, Inox Leasing and Finance Ltd, has the controlling interest of 53% in the public company. In other words, the Jains of Inox-GFL group have the habit of constantly restructuring public companies to suit their interests.

Promoter (Inox Wind’s)  Track Record (in Cr)
Period Ended	Mar-22	Mar-21	Mar-20	Mar-19	Mar-18	Mar-17	Mar-16
Revenue	625	711	760	1437	480	3415	4414
Operating Profit	-310	-165	-116	149	-83	542	711
OPM%	-49.7	-23.3	-15.3	10.4	-17.2	15.9	16.1
Other Income	84	73	24	17	24	65	66
EBIDTA	-227	-93	-92	166	-58	607	777
EBIDTA %	-32	-11.8	-11.8	11.4	-11.6	17.4	17.4
Interest	283	255	244	169	171	155	96
Depreciation	89	88	80	66	52	44	33
Except Item	-2	-23	-14	7	1	19	-20
Tax	0	0	0	0	0	101	164
Net Profit	-430	-311	-279	-40	-189	303	452
Equity	222	222	222	222	222	222	222
Reserves	1607	1094	1464	1743	1782	1968	1622
Borrowing	1718	1438	846	1092	831	1528	1450
Fixed Assets	1492	1422	1261	1039	1004	877	594
Share Price -High	160.00	82.80	74.80	119.00	208.70	295.05	494.70
Share Price -Low	61.45	17.90	16.00	56.85	100.00	160.95	217.00
Closing Price	110.65	70.05	18.55	66.90	108.45	170.00	260.35

 

INOX GREEN ENERGY OFFER AT A GLANCE
Offer Type	Book Built
Platform	Main Frame
Offer Size	Rs 740 Cr (11,38,46,154 equity shares)
Fresh Issue	Rs 370 Cr (5,69,23,077 equity shares)
Offer for Sale	Rs 370 Cr (5,69,23,077 equity shares)
Face Value	Rs 10
Price Band	Rs 61 – 65
Mkt/Bid Lot	230 Nos.
Implied M-Cap	Rs 1,897 Cr
Implied Equity Cap	Rs 291.93 Cr
Free Float	43.96%
Lead Manager	Edelweiss Financial, Dam Capital, Equirus Capital, IDBI Capital & Systematix Corp
Registrar	Link Intime
Listing	BSE, NSE

 

INDICATIVE ISSUE SCHEDULE
Opening          :11-Nov-2022	Closing      :15-Nov-2022
Allotment        :18-Nov-2022	Refunding :21-Nov-2022
Demat Credit :22-Nov-2022	Trading     :23-Nov-2022

 

The Offer

Registered in Vadodara and based in Noida, Inox Green Energy Services Ltd (IGESL) is entering the capital market with a Rs 740 Cr IPO which consists of a fresh issue of Rs 370 Cr (5,69,23,077 equity shares) and an offer for sale of equal amount and number of shares. The offer is being made through the book-building route with a price band of Rs 61 – Rs 65 for Rs 10 paid-up share.

Applicants for the IPO should bid for a minimum lot of 230 shares and multiples thereof. The shares are proposed to be listed on the main frame of BSE and NSE on Wednesday, November 23, 2022. Edelweiss Financial, DAM Capital, Equirus Capital, IDBI Capital and Systematix Corporate are acting as lead-managers to the offer. Link Intime has been roped in as registrar to the issue. The bidding opens on Friday, November 11, 2022 and closes on Tuesday, November 15, 2022.

The company proposes to utilize the net proceeds from the fresh issue (Rs 370 Cr) towards repayment of loans and redemption of NCDs to the tune of Rs 260 Cr. The balance amount is earmarked for general corporate purposes.

Lineage

Originally incorporated as Inox Wind Infrastructure Services Limited in May 11, 2012, IGESL is a subsidiary of Inox Wind Limited (IWL). The name of the company was changed to the present one in October 2021. Following the Inox-GFL group’s tradition, IGESL has indulged in many acquisitions and divestments. It acquired 100% shareholding of Marut-Shakti Energy India Ltd in 2013, 100% shareholding of Satviki Energy Private Ltd and Sarayu Wind Power (Tallimadugula) Private Ltd in 2015, 100% shareholding of Vinirrmaa Energy Generation Private Ltd and Sarayu Wind Power (Kondapuram) Private Ltd and RBRK Investments Ltd in 2016.

IGESL Divested 100% shareholding in Sri Pavan Energy Private Ltd in 2020, pursuant to a shareholders’ agreement entered into with KPR Infra & Projects Ltd. In 2021 the company divested 100% shareholding in Resco Global Wind Services Private Ltd, pursuant to a share-purchase agreement with Inox Wind Ltd. Same year it also divested 100% shareholding in Marut-Shakti Energy India Ltd, Satviki Energy Private Ltd, Sarayu Wind Power (Tallimadugula) Private Ltd, Vinirrmaa Energy Generation Private Ltd, Sarayu Wind Power (Kondapuram) Private Ltd and RBRK Investments Ltd, pursuant to respective share purchase agreements with Resco Global.

After changing the name from ‘Inox Wind Infrastructure Services to Inox Green Energy Services in 2021, the company divested the business undertaking, assets and liabilities of the erection and commissioning services of wind turbine generators (EPC) business on slump sale basis, pursuant to a business transfer agreement with Resco Global. This year it divested 100% shareholding in Wind Two Renergy Private Ltd to Torrent Power Ltd and divested 100% shareholding each in Wind One Renergy Ltd, Wind Three Renergy Ltd and Wind Five Renergy Ltd to Adani Green Energy Ltd.

Currently, IGESL is a loss-making company with an accumulated deficit of Rs 378 Cr. Ironically, the loss-making company, whose annual revenue is less than even its equity capital, has collected a huge share premium of over Rs 920 Cr by allotting shares within the group apparently to justify the IPO premium.

Key Management

IGESL’s board consists of six directors of which as many as five are on the board of loss making IWL too. The company has listed five people as Key Managerial Personnel. Of these, Manoj Shambhu Dixit and Mukesh Manglik are the whole-time directors. The other three are actually consultants hired without remuneration!

Strangely, none of the Inox-Jain family member is on the board of IGESL. Promoter-family member Devansh Jain is named as one of the consultants along with Kailash Lal Tarachandani and Jitendra Mohananey. Incidentally, the three consultants who are included in the list of Key Managerial Personnel are actually full time executives of IWL!

Devansh Jain is a whole-time director of IWL, Kailash Lal Tarachandani is the CEO and Jitendra Mohananey is senior vice-president.  Will the five directors and three consultants from IWL deliver in Inox Green what they could not do at Inox Wind?

Stakeholders

Currently, IWL is holding 2,205 lakh shares (93.84%) at an average cost of Rs 48.28 a piece. The fresh issue will enlarge the equity to 2,919 lakh shares and the offer for sale will reduce the promoter’s holding to 1,636 lakh shares or 56.04%. Whereas the cost of public holding would be Rs 65 a share, the promoter’s cost of residual holding would be Rs 42.26 post offer for sale.

Business

IGESL is one of the major wind power operation and maintenance service providers, undertaking long-term maintenance services for wind farm projects, specifically for wind turbine generators (WTGs) and the common infrastructure facilities on the wind farm which support the evacuation of power from such WTGs.

IGESL main revenue comes from its parent company, IWL, which is principally engaged in the business of manufacturing WTGs and providing turnkey solutions by supplying WTGs and offering a variety of services including wind resource assessment, site acquisition, infrastructure development, EPC of WTGs, and, through IGESL, provides long-term operation and maintenance services for wind power projects.

Financial Track

The decade-old IGESL is a loss-making company at the net level. For fiscal 2022, revenue was at Rs 172 Cr on which it netted a loss of Rs 93 Cr. As a matter of fact, the company’s revenue has remained around Rs 172 Cr for the last four years. At the end of fiscal 2022, accumulated deficit amounted to Rs 367 Cr. What’s disturbing is, while the top line has remained almost static, equity capital has bulged from Rs 57 Cr in 2019 to Rs 235 Cr in 2022. This will further increase to Rs 292 Cr after the public issue.

Inox Green Consolidated Financials (in Cr)
Period Ended	Jun-22	Mar-22	Mar-21	Mar-20	Mar-19
Months	3	12	12	12	12
Revenue	62	172	172	165	164
Operating Profit	18	84	96	89	82
OPM%	29.6	48.9	55.7	53.6	50.1
Other Income	1	18	14	7	2
EBIDTA	20	102	110	95	84
EBIDTA %	41.6	58.2	59.1	55.6	50.7
Interest	18	55	61	53	30
Depreciation	17	50	49	40	27
Net Profit/Loss	-12	-93	-154	-52	-53
Equity (Implied)	292	235	129	116	57
Reserves (Implied)	1251	938	19	101	60
Accumulated Loss	378	367	307	153	101
Borrowing	910	904	1411	1085	1154
Fixed Assets	1100	1086	1016	802	571

Valuation

All the wind power related public companies of Inox group are currently making losses but, strangely, they are currently ruling at ultra high valuations. A close scrutiny of the shareholding pattern of these companies reveal at declines the promoter group indulges in buying thereby supporting the stock prices. Such tactics will not work long when the companies are continuously loss-making. Hence, in the absence of profits, what happened to IWL stock post IPO can happen to IGESL too.

 

HOW INOX WIND GROUP COMPANIES COMPARE
Financials
(Amount in Cr)	Inox Green	Inox Wind	Inox Wind Energy
Activity	Wind Mill    O&M Service	Wind Turbine Generators	Wind Power +             EPC-Wind Farm
Market Cap	1528	3997	1258
Borrowing	904	1718	1780
Fixed Assets	1086	1492	1585
Revenue	172	625	598
Other Income	18	84	191
EBIDTA	102	-227	-145
Interest	55	283	272
Net Profit	-93	-428	-334
Equity Cap	235	277	11
Reserves	938	1607	1446
Acc. Loss	378	0	0
Stock Features
Current Price (Rs)	65	144	1144
Face Value (Rs)	10	10	10
Book Value	33.83	67.94	1325.38
Promoter Stake %	56.04	72.24	68.72
Debt/Equity	1.14	0.91	1.22
Profitability
OPM %	48.9	-49.7	-56.2
Net Margin %	-1.6	-60.4	-42.4
Cash EPS	2.01	-12.14	-26.82
Earnings Per Share	-0.13	-15.34	-110.99
Return
RONW %	0	0	0
ROCE %	2.1	0	0
Discounting
Price/Earnings	(-)	(-)	(-)
Price/Cash EPS	32.4	(-)	(-)
Price/Book Value	1.9	2.1	0.9
Price/EBIDTA	14.9	(-)	(-)
Price/Revenue	8.9	6.4	2.1
Price/Fixed Assets	1.4	2.7	0.8
Distribution
Dividend %	0	0	0
Yield %	0	0	0
Pay-out %	0	0	0

Concern

• IWL’s track record exposes promoter’s lack of credibility.
• IGESL has entered into a business transfer agreement by which it divested the erection, procurement and commissioning business to one of the subsidiaries of the promoter (IWL), Resco Global Wind Services, which imposes certain contractual obligations on IGESL which are not in the interest of the public shareholders.
• IGESL along with certain entities have provided security in form of pari-passu charge on IGESL’s movable fixed assets, guarantees and a shortfall undertaking against the term loan facilities availed by Resco Global,  and failure by Resco to repay such loan facilities, could have an adverse effect on IGESL’s business, results of operation and financial condition.

• IGESL is facing civil proceedings  involving an amount of over Rs 285 Cr and claims relating to direct and indirect tax proceedings amounting to Rs 28 Cr. Further, it has various contingent liabilities aggregating to Rs 236 Cr which about 30% of the company’s current net worth.