Acme Solar Holdings, a significant player in India’s renewable energy sector, ranks among the top 10 renewable energy providers as of March 31, 2024. Having expanded from solar projects to a more comprehensive renewable energy portfolio, Acme Solar Holdings is launching an IPO to support its growth and reduce debt in subsidiaries. Key IPO details are as follows:

• IPO Dates: Opens on November 6 and closes on November 8, 2024.
• Issue Size: ₹29,000 crore, with a Fresh Issue of ₹2,395 crore and an Offer for Sale (OFS) of ₹505 crore.
• Price Band: ₹275 to ₹289 per share.
• Market Capitalization: Estimated at ₹17,515.70 crore at the upper band price.
• Lot Size: 51 shares, with a minimum retail investment of ₹14,739.
• Listing Date: Expected on November 13, 2024, on BSE and NSE.
• Anchor Investors: Acme raised ₹1,300.50 crore through anchor investors at ₹289 per share.

Objectives of the IPO

The funds raised from the IPO are earmarked for two primary objectives:

1. Debt Repayment: Approximately ₹17,950 million will go towards repayment or prepayment of borrowings taken by subsidiaries.
2. General Corporate Purposes: The remaining proceeds will be utilized for general corporate purposes.

Financial Performance

Acme Solar Holdings has demonstrated resilience and growth as a renewable energy leader. Here is an outline of its recent financial performance:

• Revenue: Revenues for FY2024 were ₹14,662.67 million, showing a consistent performance with minor fluctuations over recent fiscal years.
• EBITDA: EBITDA for FY2024 stood at ₹10,891.48 million, indicating stable operating margins.
• Profit After Tax (PAT): The PAT for FY2024 was ₹6,977.81 million, marking a significant recovery from prior fiscal years, especially FY2023, which recorded a marginal loss.

For this IPO, Acme Solar is issuing shares at a pre-issue EPS of ₹12.55 and a post-issue EPS of ₹11.53. The pre-issue P/E ratio of 23.02x and the post-issue P/E ratio of 25.06x appear reasonable given the sector average.

Valuation and Investment Analysis

Acme Solar’s valuation metrics suggest that the IPO is fairly priced compared to its financial performance. The company’s Cash Return on Equity (RoE) stands at 38.83% for FY24, which is a positive indicator for profitability.

However, the Grey Market Premium (GMP) for the IPO shows no premium, indicating limited expected listing gains. This could signal that the market sees the IPO as fully valued, with little upside in the short term.

Subscription Status and Allotment Information

As of 12:20 PM on November 7, 2024, Acme Solar IPO was subscribed 0.52 times. Investors can monitor the live subscription status through the BSE website. Allotment is scheduled for November 11, 2024, and investors can check their allotment status via the KFin Technologies website.

Investment Pros and Cons

Pros:

• Market Leader in Renewable Energy: Acme Solar’s established presence and diversified renewable portfolio position it as a strong player in India’s expanding green energy sector.
• Positive Financial Trajectory: Significant improvement in PAT and stable EBITDA growth over recent fiscal years.
• High Cash RoE: A RoE of 38.83% is attractive, indicating efficient capital utilization.

Cons:

• No Grey Market Premium: Lack of a GMP indicates limited listing gains potential.
• Modest Growth in Revenue: Revenue growth has been steady but lacks substantial upward momentum, which may limit short-term growth.
• High P/E Ratio Relative to Sector: While Acme’s P/E is below the industry average, it is high in absolute terms, suggesting the IPO is priced fully.

Conclusion: Investment Recommendation

The Acme Solar IPO provides a chance to invest in a leading renewable energy company, a sector with strong long-term growth potential. However, considering the moderate revenue growth, valuation metrics, and absence of Grey Market Premium, the IPO appears fairly priced with limited potential for short-term gains.

For long-term investors confident in India’s renewable energy growth trajectory, Acme Solar may offer value through sectoral growth. However, short-term investors focused on immediate returns may prefer to approach this IPO cautiously due to the low expected listing premium.

The Upcoming IPOs in this week and coming weeks are Archit Nuwood Industries Limited, Neelam Lines and Garments, Rosmerta Digital, NTPC Green, Avanse Financial and Zinka Logistics.

The Current active IPO is Sagility India Limited, Swiggy, ACME Solar Holdings and Niva Bupa Health .

For more insights into financial trends , visit our Top News Headlines. You can also explore investment opportunities in the market and apply for upcoming IPOs through our Best IPO to Apply Now section.