Solarworld Energy Solutions IPO — Should You Bid? Read Anand Rathi's Report For Key Issue Details

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Anand Rathi Report

Solarworld Energy Solutions Ltd.'s will launch its initial public offering on Sept. 23 and the offer closes for subscription on Sept. 25. A solar energy solutions provider specialising in EPC services for solar power projects has fixed the price band in the range of Rs 333 to Rs 351 per equity share.

Investors can place bids starting from a minimum of 42 shares and in multiples thereafter.

The Rs 490-crore IPO is a mix of fresh issuance of shares aggregating up to Rs 440 crore as well as an offer for sale of Rs 50 crore.

Nuvama Wealth Management 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 the offer.

Objects of the Issue:

• Investment in the Subsidiary, KSPL for part financing the establishment of the Pandhurana Project and general purpose.

Strengths:

• Established track record and strong in-house execution capabilities for end-to-end solar EPC solutions.

• Strong financial performance driven by asset light business model.

• Strong customer relationships built on reliable delivery of projects with a significant focus on quality.

• Strong customer relationships built on reliable delivery of projects with a significant focus on quality.

• Experienced management team and qualified personnel with significant industry experience.

Key Strategies:

• Invest in manufacturing capabilities for solar modules, BESS and solar PV TopCon cell.

• Grow their customer base by diversifying into new geographies and maintain relationships with key customers and other stakeholders.

• Exploring opportunities to expand portfolio and scale their operations.

• Establish strong research and development capabilities to drive innovation and technological advancement.

Valuation:

SolarWorld Energy Solutions, is a solar energy solutions provider specializing in engineering, procurement, and construction services for solar power projects.

It provides comprehensive, end-to-end, and cost-efficient solar power installation solutions customized to the requirements of public sector and commercial and industrial clients. Its operational strength is underpinned by robust execution capabilities, as evidenced by a portfolio of completed projects that have reached commercial operation and a pipeline of ongoing projects currently under order or execution.

On the valuation front, based on annualized FY25 earnings, the company is seeking a P/E of 39.6 times, and a post-issue market capitalization of approximately Rs 30,422 million, making the issue appears to be fully priced.

The company operates within a highly competitive and fragmented market landscape. The growth of the solar sector in India is predominantly driven by strong government support, evidenced by an aggressive and sustained tendering approach therefore company would capitalize profitability in long run. Hence, we assign Subscribe for long term rating for the issue.

Key Risk:

• Customer Concentration Risk: For Fiscals 2025, 2024, and 2023, the Company derived 79.19%, 91.16%, and 87.98%, respectively, of its revenue from a single key customer, SJVN Green Energy Limited. Such significant dependence on one customer exposes the Company to a high degree of concentration risk. Any reduction in orders, delay in payments, or termination of contracts by this customer could materially and adversely impact the Company’s business operations, financial performance, and future growth prospects.

• Project Execution Risk: The Company’s installation and construction activities are subject to risks of cost overruns, delays, and project completion uncertainties. Factors such as adverse site conditions, supply chain disruptions, shortage of skilled labor, design changes, or delays in regulatory approvals could increase project timelines and costs. Such execution challenges may adversely affect the Company’s operational efficiency, profitability, and customer relationships, thereby impacting overall business performance.

• Fixed-Price Contract Risk: The Company enters into fixed-price EPC contracts, where revenues are predetermined irrespective of actual project costs incurred. Any inaccurate estimation of costs at the bidding stage, or inability to effectively manage supplier and subcontractor relationships, may result in higher-than-expected construction costs and increased working capital requirements. Such cost overruns could materially and adversely impact the Company’s financial condition, cash flows, operating margins, and overall results of operations.

• Supply Chain Risk: The Company’s operations are dependent on the timely availability and quality of key raw materials and components sourced from suppliers. Any restrictions in supply, delays in procurement, or defects in quality could disrupt project schedules and increase costs. Such disruptions may impair the Company’s ability to deliver projects on time and at profitable margins, which could have a material adverse effect on its business operations, financial condition, and results of operations.

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