Waaree Energies' IPO opens: Should you avoid or subscribe?

Primary Market Update: The Rs 4,321 crore initial public offering (IPO) of Waaree Energies opened for public subscription today. The issue will close on October 23 and comprises a fresh share issuance of Rs 3,600 crore and an offer for sale (OFS) of up to 48 lakh shares worth Rs 721.4 crore.

Ahead of the issue opening, the company mopped up Rs 1,277 crore from 92 anchor investors, including the likes of HDFC Funds, Aditya Birla Funds, Mirae Asset, Motilal Oswal Funds, Pinebridge and Nomura among others.

The price band for the issue has been decided in the range of Rs 1,427- Rs 1,503 per share. 

Post the issue, promoter's holdng in the company will be brought down to 64.15 per cent.

IPO objective:

Through the proceeds, the renewable energy company intends to partially finance the cost of establishing a 6GW ingot-wafer, solar cell, and solar PV module manufacturing facility in Odisha, India. Also, it intends to deploy the remaining funds towards general corporate purpose.

About Waaree Energies:

Incorporated in 1990, Waaree Energies is the largest manufacturer of solar PV modules in the country. Its portfolio of solar energy products comprises multi-crystalline modules, monocrystalline modules, and TopCon modules. 

Should you subscribe or avoid Waaree Energies' IPO?

ICICI Direct has assigned a 'subscribe' rating on the IPO given the given strong growth prospects amid industry tailwinds. The brokerage stated that sales/PAT at the company has grown at a CAGR of 100%/277% respectively over FY22-24, led by capacity scaleup and consistent improvement in EBITDA margin profile.

The company clocked EBITDA margins of 13.8 per cent in FY24 with RoCE placed at 22 per cent.

At the upper end of the price band, Waaree will command a valuation of ~35x P/E, ~22.4x EV/EBITDA & ~3.4x P/S on FY24 basis which is at a discount to its competitor i.e. Premier Energies, added ICICI Direct.

Meanwhile, KRChoksey also gave a 'subscribe' rating to the IPO and said that financially, the company has delivered impressive growth, with revenue increasing at a CAGR of 80%, EBITDA growing by 154% and PAT growing by CAGR of 203% over the past three years, reflecting improved margins and operational effectiveness.

Its return on equity (ROE) of 30% in FY24, coupled with a solid balance sheet and low debt levels, underscores its financial strength. At a P/E ratio of 33.9x, Waaree offers an attractive investment opportunity in India’s booming renewable energy market, added the brokerage.