Waaree Energies Limited, a prominent player in the solar PV module manufacturing sector, is preparing to launch its Initial Public Offering (IPO) in mid-October 2024. This follows the recent approval from the Securities and Exchange Board of India (SEBI) on September 20, enabling the company to issue fresh equity shares worth ₹3,000 crore. Additionally, 32 lakh shares will be offered by existing shareholders through the Offer for Sale (OFS) component of the IPO.
How Will the Funds Be Utilized?
A significant portion of the funds raised from the IPO will be directed towards establishing a state-of-the-art 6 gigawatt (GW) manufacturing facility for ingot wafers, solar cells, and solar PV modules in Odisha. The remaining funds will be allocated for general corporate purposes, positioning Waaree Energies for further growth. As of June 30, 2023, the company boasted an installed capacity of 12 GW, reflecting its robust market presence.
Financial Performance Highlights
Waaree Energies has shown remarkable financial growth over the past year. For the financial year ending March 31, 2023, the company reported revenue of ₹6,750 crore, a significant increase from ₹2,854 crore in FY22. The profit after tax soared nearly five times to ₹500.2 crore compared to ₹79.6 crore the previous year. The company is cash-flow positive with reserves totaling ₹642 crore as of March 31, 2023.
Notably, the company’s top 10 customers contributed a staggering 65.90% of its revenue in FY23, an increase from 42.78% in FY22. This trend continued into the first quarter of FY24, where the top customers accounted for 76.11% of total revenue, with one major customer alone contributing nearly 20%.
Strong Export Sales and Market Dependency
Waaree Energies heavily relies on export sales, particularly from the United States, which constituted 73% of total revenue in Q1FY24. Sales to the US alone contributed almost 65% of the total revenue, making it a critical market for the company. This reliance on a single international market poses both opportunities and risks for Waaree Energies.
Key Risk Factors to Watch
While Waaree Energies shows promising growth, potential investors should be aware of various risk factors associated with the IPO:
- Retail Sales Dependency: The company’s ability to increase retail sales across commercial, industrial, and residential sectors hinges on its relationships with franchisees. A decline in these relationships could adversely affect cash flows and overall business operations. In FY23, retail sales accounted for only 9.96% of total revenue.
- Geographical Concentration: A significant portion of Waaree’s retail sales is generated from Gujarat. Any unfavorable changes in demand from this region could negatively impact the company’s financial health.
- International Expansion Risks: Waaree Energies is in the process of establishing a 3 GW manufacturing facility in the United States. Challenges in executing this expansion could hinder the company’s growth trajectory and financial stability.
Company Background and Growth Trajectory
Founded in 2007, Waaree Energies has made significant strides in the solar energy sector. The company has ramped up its total installed capacity from 2 GW in FY21 to an impressive 12 GW by June 2023. With four manufacturing facilities located in Gujarat, Waaree Energies utilizes cutting-edge technologies such as multicrystalline cells, monocrystalline cells, and tunnel oxide passivated contact (TopCon) to enhance efficiency and minimize energy losses.
By focusing on providing high-quality, cost-effective solar energy solutions, Waaree Energies aims to play a crucial role in reducing the global carbon footprint. As it prepares for its IPO, all eyes will be on how the company navigates the challenges and opportunities ahead in the rapidly evolving renewable energy sector.
