Waaree Energies IPO: The Next Sunstorm in Solar Stocks?

India's vast landmass bathed in sunshine creates a perfect scenario for harnessing solar energy.

The sector is booming, fuelled by impressive growth and a government firmly committed to a sustainable future.

In 2023, India had surpassed a significant milestone, reaching over 60 GW of installed solar power capacity. This achievement marks a major step on the ambitious path towards achieving 500 GW by 2030.

This surge is driven by India's dedication to clean energy sources and its lofty green ambitions.

As solar power becomes an increasingly crucial element of the national energy mix, solar stocks are emerging as an attractive option for investors seeking long-term growth alongside environmental responsibility.

While existing companies have already enjoyed a rally, a hot new prospect awaits: Waaree Energies, a solar photovoltaic modules manufacturer is gearing up for an IPO.

About Waaree Energies

Waaree Energies Ltd is the flagship company of Waaree Group, founded in 1989 with headquarters in Mumbai, India.

The company is a primary player in the sustainable energy domain. They are focused on offering cost-effective, sustainable energy solutions across markets and helping reduce carbon footprint.

Waaree Energies has an aggregated installed capacity of 2 GW to produce PV modules.

They are the only Indian company with an in-house laboratory accredited by the National Accreditation Board for Testing and Calibration Laboratories (NABL).

#2 Factors Setting this IPO Apart

• Waaree Energies stands out as the largest solar photovoltaic (PV) module manufacturer in India, boasting a formidable manufacturing capacity of 12 GW. In comparison, Adani Solar, a subsidiary of Adani Green Energy Ltd, and ReNew Power have the second-highest capacity of 4 GW each as of June 2023.
• With a 24% market share in the total installed capacity, Waaree Energies has cemented its position as a leader in the Indian PV module manufacturing industry.
  
  This significant market share reflects the company's strong market presence and reliability, making it a key player in the renewable energy landscape.
• Waaree Energies' advanced manufacturing facilities, which hold global accreditations, highlight the company's commitment to quality and international standards.
• The company has achieved deep penetration into the rooftop solar segment through its extensive pan-India franchisee network.
• The backing of seasoned investors such as Madhusudan Kela significantly boosts Waaree Energies' credibility and investor confidence. In June 2023, Kela invested Rs 39.88 crore, acquiring 725,000 equity shares at Rs 550 per share, amounting to a 1.28% stake in the company.

The company has filed for a Rs 15 billion (bn) IPO with SEBI, which comprises a fresh issue of Rs 13.5 bn and an offer for the sale of OFS of approximately Rs 1.5 bn.

#3 A Look at its Financials

The company has demonstrated revenue growth of 86% on a compounded annual growth rate (CAGR) basis over the period spanning from the financial years 2021 to 2023.

This performance can be credited to the growing customer base and a continuous growing demand.

While there was a good increase in revenue, the net profit of the company also increased from Rs 0.5 bn in March 2021 to Rs 5 bn in March 2023, at a CAGR of 231%.

Its net profit margins too saw an improvement form 2.3 to 7.3 in FY23.

Waaree Energies' Financial Snapshot (2021-23)

Particulars	31-Mar-21	31-Mar-22	31-Mar-23
Revenues (Rs in bn)	19.5	28.5	67.5
Revenue Growth (%)	-	46.1	136.5
Net Profit (Rs in bn)	0.5	0.8	5
Net Profit Margin (%)	2.3	2.7	7.3
Net Worth (Rs in bn)	3.5	4.2	18.2

Data Source: Company's Draft Red Herring Prospectus (DRHP)

For the period ended June 2023, revenue from operations stood at Rs 33.3 bn and a profit of Rs 3.4 bn.

The company has a substantial order book of solar PV modules and as of 30 November 2023, the pending order book was 20.2 GW which included domestic orders, export orders, and franchisee orders, and 3.8 GW of orders for the subsidiary, Waaree Solar Americas Inc.

#4 Peer Comparison

As per the company's red herring prospectus, these are the industry peers of Waaree Energies.

Peer Comparison

Company	Total Revenue (Rs in million)	Net Profit (Rs in million)	EPS (Basic) (in Rs)	Return on Net Worth (%)
Waaree Energies	67,509.00	5,002.00	21.8	26.4
Websol Energy Systems	172	-237	-6.3	-12,628.90

Data Source: Company's Red Herring Prospectus (RHP)

From a product perspective, Waaree Energies manufactures both mono-crystalline and multicrystalline solar modules.

Out of all the listed players, Websol Energy System is the only company with a similar product portfolio as it manufactures multicrystalline solar modules, according to the Waaree Energies.

Waaree Energies has the highest total revenue compared to Websol Energy System, sriven by higher customer base.

Waaree Energies has seen significant growth in its financial performance in the last few years, while Websol Energy System saw a 93% YoY decline in revenue in FY23.

Websol Energy System's profit has declined since FY21, leading to the solar module manufacturer posting a net loss of Rs 237 m in FY23 in comparison to Rs 97 m profit in FYFiscal 2022.

#5 Risk Factors

• Waaree Energies is subject to restrictions or import duties on materials and equipment used in manufacturing operations. Similarly, import duties levied on products in export markets could impact the company's cost structure and pricing strategies.
• Any disruptions in the supply or availability of materials and components, especially those meeting appropriate quality standards, could adversely affect production. Fluctuations in the prices of these materials and components could also impact the company's profitability and cost management.
• The success of proposed projects is dependent on various government subsidies. If these subsidies do not materialize, or if state or central governments do not approve the full subsidy amount, Waaree Energies may need to raise additional capital. This could materially impact the company's cash flows, financial condition, and results of operations.
• Waaree Energies' business relies heavily on certain key customers. The loss of any of these key customers could significantly impact the company's revenue and market position.

Conclusion

The Indian government's initiatives, such as the Production Linked Incentive (PLI) and the Solar Park Scheme, have fostered a favourable environment for solar power development and domestic manufacturing.

These measures, aimed at achieving economies of scale, cost reduction, and job creation, reflect a concerted effort to promote sustainable energy solutions.

According to forecasts for the Indian solar energy market, substantial growth is anticipated, with projections indicating a market size of approximately US$ 238 bn by 2030.

This growth trajectory, expected to be driven by a compound annual growth rate (CAGR) of about 40% between 2024 and 2032, underscores the immense potential of the solar energy sector in India.

Currently, India faces significant energy import dependence, with about 85% of its energy needs sourced from other countries, resulting in considerable expenditure.

By harnessing solar energy, India has the opportunity to mitigate this dependency on imports and meet its energy demands more sustainably.

For Waaree Energies being the largest solar photovoltaic (PV) module manufacturer, this presents a promising growth trajectory.

Nevertheless, it is always prudent to conduct thorough research before making any investment decisions.

Ensure that the investment aligns with your financial objectives and matches your risk tolerance level.

For more information on IPOs, check out the list of upcoming IPOs.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...