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SBI Securities Report
Here are the 10 things to know before investing in Powerica IPO
1. Powerica Ltd. launched its initial public offering (IPO) today, March 24 and the offer closes for subscription on March 27.
2. An integrated power solutions provider has fixed the price band in the range of Rs 375 to Rs 395 Apiece.
3. The Powerica IPO is a book-build issue of Rs 1,100 crore. It comprises a fresh issue of 1.77 crore shares worth Rs 700 crore and an offer-for-sale (OFS) of 1.01 crore shares amounting to Rs 400 crore.
4. Investors can place bids starting from a minimum of 37 shares and in multiples thereafter, meaning a minimum amount of investment required by an individual investor (retail) is Rs 14,615 based on upper price.
5. ICICI Securities, IIFL Capital Services, Nuvama Wealth Management are the book running lead managers while MUFG Intime India Ltd. is the registrar of the issue.
6. Cummins India and Kirloskar Oil Engines are are among Powerica's peers in the sector.
7. Object of the Issue
- Prepayment or Repayment of certain outstanding borrowings availed by the company.
- General corporate purposes.
8. Growth Strategies
- Capitalize on continued demand for Diesel Generator Sets.
- Continue to develop the Wind Power business and diversify further into Wind Solar hybrid projects.
- Develop and expand the RECD Business through its Associate as the demand increases.
- Further develop and strengthen alliances with global partners to Improve its position in India.
- Continuously evaluate expansion opportunities, considering policy and consumer base attractiveness.
9. Risk Factors
- Segment concentration: During FY23/FY24/FY25/H1 FY26, the company derived 82.8%/86.3%/85.0%/80.5% of its revenue from its Generator set business. Any negative developments affecting this segment may have an adverse impact on the company's performance.
- Collaboration dependent business model: The company is significantly reliant on its business collaborations for the supply of critical products and services that drive the operations of its generator business. It depends on Cummins as the supplier of engines and alternators for the DG sets and on Hyundai for the MSLG sets.
- IPP operations reliance on OEMs: The IPP business of the company relies on key relationships with OEMs to facilitate supply of components and effective O&M services across most of its Operational Wind Power projects. Its key Wind Turbine Generators(WTG) suppliers are Vestas Wind Technology India Private Ltd and GE Renewable R&D India Private Ltd.
- Mismatch between tenure of PPA and Land Lease: Some of the land lease agreements for the company's wind power projects have shorter terms than the corresponding PPA of the respective projects. The expiry and non-renewal of such land lease agreements prior to the end of the relevant PPA could potentially result in the premature termination of the corresponding PPA. Growth Strategies.
10. Valuation:
At the upper band of issue price of Rs 395, the IPO is valued at 19.4x annualized FY26 earnings on post-issue capital. Although the revenue has grown only at a mid-single digit CAGR of 5.6% between FY23-FY25, growth has picked up during FY26.
Demand for Diesel Generatorsetsremains strong led by data centers and backup power applications. The company has strong long term relationships with Cummins, Hyundai, Schneider Electric, GE Vernova and Vestas.
We recommend investors to Subscribe to the issue for long term.
Click on the attachment to read the full report:
ALSO READ: Powerica IPO Opens March 24: GMP Indicates Listing Gains Ahead Of Opening; Details Here
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