Acme Solar Holdings Limited, one of India's largest renewable energy Independent Power Producers and a prominent player in the industry, is set to go public with an Initial Public Offering (IPO) in November 2024. The IPO, which opens for subscription on November 6, 2024, and closes on November 8, 2024, offers an opportunity for investors to tap into the booming renewable energy sector in India. Here’s a comprehensive breakdown of the IPO details, its objectives, and an analysis of its potential.

IPO Overview

The Acme Solar Holdings IPO consists of a fresh issue of 828.71 lakh shares worth ₹2,395 crore and an offer for sale (OFS) of 174.74 lakh shares, totaling ₹505 crore. The price band for the IPO has been set at ₹275 to ₹289 per share, with a lot size of 51 shares. For retail investors, the minimum investment required is ₹14,739, while high-net-worth individuals (HNIs) need to invest a minimum of ₹2,06,346 for 14 lots (714 shares).

At the upper price band of ₹289, Acme Solar Holdings' market capitalization will stand at ₹17,515.70 crore. This offers an insight into the scale of the company in the renewable energy sector.

IPO Objectives and Use of Proceeds

The fresh issue proceeds from the IPO will be used primarily for investment in subsidiaries and repayment/prepayment of outstanding borrowings. The company aims to utilize approximately ₹17,950 million for these purposes, while the remaining funds will be directed toward general corporate purposes.

Financial Performance and Valuation

Acme Solar Holdings has demonstrated strong financial growth in recent years, with revenues from operations in fiscal years 2024 and 2023 standing at ₹14,662.67 million and ₹13,613.73 million, respectively. The company has maintained robust EBITDA margins of ₹10,891.48 million for FY24, though the Profit After Tax (PAT) saw a significant turnaround, from a loss of ₹31.74 million in FY23 to a profit of ₹6,977.81 million in FY24.

For the IPO, the pre-issue Earnings Per Share (EPS) stands at ₹12.55, while the post-issue EPS is expected to be ₹11.53. The pre-issue Price-to-Earnings (P/E) ratio is 23.02x, and the post-issue P/E ratio is 25.06x, compared to the industry P/E ratio of 170.3x. This suggests that Acme Solar Holdings is being valued attractively in comparison to its industry peers, despite the IPO's full pricing.

Grey Market Premium and Investor Sentiment

The Grey Market Premium (GMP) of the Acme Solar Holdings IPO is currently ₹0, indicating minimal expectations of listing gains based on current financial trends and market sentiment. This suggests that real trading activity in the grey market is low and investors should be cautious in relying on speculative gains in the unregulated market.

IPO Subscription and Allotment Process

The IPO will be open for subscription between November 6, 2024, and November 8, 2024. The allotment date is expected to be finalized on November 11, 2024, with the shares to be listed on the BSE and NSE on November 13, 2024.
Investors can check their allotment status via the registrar’s website by entering their application number, PAN, or DP Client ID.

Recommendation

Given the financial performance and valuation metrics, the Acme Solar Holdings IPO is priced fairly but is not likely to offer significant listing gains based on current market conditions. Although the company’s solid position in the renewable energy sector and the Indian government's push for green energy are positive, we recommend caution for those looking at short-term listing gains. For long-term investors, it could be worth considering, but only after thorough analysis of the post-listing performance.

Final Thoughts

Acme Solar Holdings represents a significant player in the renewable energy space, but with a fully priced IPO, investors should carefully assess whether to subscribe. The strong financials and sectoral growth prospects may offer value in the long run, but the low Grey Market Premium and the potential for limited immediate gains suggest that this IPO may be a hold for those seeking longer-term exposure to the Indian renewable energy market.

For real-time updates on the Acme Solar Holdings IPO and more IPO news, follow Top News Headlines - Share Market News, Latest IPO News, Business News, Economy News- Finance Saathi.
Join the Trading with CA Abhay Telegram Channel for stock market tips and the Finance Saathi Telegram Channel for the latest market trends and IPO news.

Start your stock market journey today by opening a free Demat account with Choice Broking FinX.