Fujiyama Power (UTL Solar) IPO Opens— Should You Subscribe? Read HDFC Securities Report For Key Issue Details

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

HDFC Securities Retail Research

Fujiyama Power Systems Ltd. launched its initilal public offering today, November 13 and the offer will close for subscription on Nov. 17 and the price band is fixed in the range of Rs 216 and Rs 228 per equity share.

The parent company operates under the brand name UTL Solar and provides products and solutions for the rooftop solar industry. They produce a variety of products, including solar panels, inverters, and batteries.

The Rs 828-crore IPO comprises a fresh issue of 2.63 crore shares worth Rs 600 crore and an offer-for-sale (OFS) of one crore shares, amounting to Rs 228 crore.

Investors can place bids starting from a minimum of 65 shares and in multiples thereafter, meaning would require a minimum investment of Rs 14,820.

The shares of Fujiyama Power Systems will be listed on both the National Stock Exchange and the BSE.

Motilal Oswal Investment Advisors Ltd., SBI Capital Markets Ltd., are the book-running lead managers for the public issue while MUFG Intime India Pvt Ltd. is the registrar to issue.

Objects of Issue:

Offer for Sale

Each of the selling shareholders shall be entitled to its respective portion of the proceeds of the Offer for Sale after deducting its proportion of the Offer expenses and relevant taxes thereon.

The Company will not receive any proceeds from the Offer for Sale and the proceeds received from the Offer for Sale will not form part of the Net Proceeds.

Requirements of funds

The company proposes to utilize the net proceeds from the fresh issue towards the following (collectively, referred to herein as the “Objects”): 

• Part financing the cost of establishing the manufacturing facility in Ratlam, Madhya Pradesh, India.

• Repayment and/ or prepayment of all or a portion of certain outstanding borrowings availed by the company.

• General corporate purposes

Competitive Strengths

• Diversified portfolio of solar products and solutions.

• Track record of technological development and product innovation.

• Robust distribution network, and post-sale service capabilities driving strong brand recognition.

• Precision-driven large scale manufacturing infrastructure driving production efficiency.

Business Strategy:

• Expand the manufacturing base for solar panels, inverters and batteries and strengthen back-end integration in solar panels.

• Further strengthening domestic distribution and retail network and increase export sales.

• Address market opportunities through improving efficiency and innovative marketing tools.

Key Concerns

• Fujiyama Power Systems’ manufacturing facilities are subject to various operational risks. Any disruption in operations or shutdown of their existing manufacturing facilities or future manufacturing facilities or any other operational problems caused by unforeseen events may reduce sales and adversely affect business, and results of operations and financial condition.

• The company is dependent on a limited number of third party suppliers of materials and components for manufacturing of products. Any disruptions in the supply or availability of materials and components of the appropriate quality standards and fluctuation in their prices may have an adverse impact on their business operations, cash flows and financial performance.

• Fujiyama Power Systems benefits from multiple government initiatives such as ALMM, PM Suryaghar: Muft Bijli Yojna, Grid Connected Solar Rooftop Program. In the event that these subsidies do not materialize or the central or state governments do not approve the entire subsidy amount or if there are any adverse changes in the availability of subsidies, it may increase cost of investment for the Company, and adversely impact customers’ affordability of their products, thereby impacting overall sales.

• Geographical concentration of their manufacturing facilities in northern India exposes FSL to region-specific risks that could adversely affect business, financial condition, results of operations, and cash flows.

• The Dadri Facility application is under process for the consent to establish. Any failure by them to renew, maintain or obtain the required permits or approvals at the requisite time may result in the interruption of operations and may have a material adverse effect on business, results of operations and financial condition.

• Unlike ground-mounted or utility-scale projects, rooftop solar installations face several unique challenges such as limited rooftop area, varied site conditions, complex customer approvals, building structural concerns, shading issues, and limited access during installation and maintenance. These factors require specialized design, supply, and installation strategies.

• Any adverse developments impacting the rooftop solar sector, including regulatory changes, subsidy withdrawals, delays in customer payments, or operational challenges, could have a material adverse effect the financials and operations of the business in a significant manner.

• Intense competition, especially from low-cost suppliers like China, pressures domestic manufacturers to lower prices, potentially impacting profit margins and market share.

• Any adverse change in the demand of products in Uttar Pradesh or failure to expand into new markets may have an adverse impact on the Company’s business, growth, financial condition, cash flows and results of operations.

• The Company has an arrangement with dealers of five years. Non-renewal of these arrangement with their key dealers could negatively affect operations and hinder with growth and financials of the Company.

• Fujiyama Power Systems imports 92% of its raw material from China. Any restrictions, either from the GoI by any other applicable authorized bilateral or multilateral organizations, on imports from China and other jurisdictions in which their principal suppliers are located, may adversely affect their business, results of operations and prospects.

• Export sales done by the Company may face changes in legal and regulatory environment; complex local tax regimes; fluctuations in currency exchange rates; political, social or economic instability; changes in technology, industry practices or trends;

• Decline in the price of their products may have an adverse impact on business, results of operations and cash flows.  Company aims to expand into new regions across India. Any failure to expand into new markets or regions could adversely affect their sales, financial condition, result of operations, and cash flows.

• Any delay in commissioning of newly planned expansion of manufacturing plants could affect financials of the Company directly. Further, in the event of any unanticipated delay in receipt of approvals from the regulators, the proposed schedule of implementation and deployment of the Net Proceeds may be extended.

• Proposed expansion for the Company is based on demand forecasts that rely on various assumptions and forecasts. Unexpected industry oversupply or lack of demand could prevent efficient capacity utilization, negatively impacting business growth and financials.

• Their manufacturing business requires a significant amount of working capital as there is considerable time lag between purchase of raw materials and realisation from sale of finished goods. In the event, that they are required to repay any working capital facilities upon receipt of a demand from any of the lenders, Fujiyama Power Systems may experience negative cash flows in the future and will be unable to satisfy its working capital requirements.

Click on the attachment to read the full IPO report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.