Explained: Why Ashish Kacholia is Bullish on this Multibagger Renewable Energy Stock

Investing in stocks hinges on mastering two pivotal decisions: knowing when to buy and when to sell. Timing is everything. Selling too early can mean missing out on significant profits while selling too late can lead to missed opportunities and potential losses.

Despite a wealth of financial literature on optimal buying and selling times, pinpointing the best strategy remains a daunting task.

To bypass the complexities of devising their successful strategies and to emulate the success of renowned market experts, many investors choose to follow the moves of celebrated investors.

This approach not only saves time but also highlights promising stock opportunities without the need for exhaustive research.

One such influential investor is Ashish Kacholia, whose every investment decision is closely watched. Recently, Kacholia bought stake in a renewable energy stock.

Which Stock did Ashish Kacholia Buy and Why?

The ace investor invested Rs 400 million (m) in Inox Green Energy Services as part of the latter's Rs 10.5 billion (bn) fundraising plan.

Kacholia will be allotted over 14.5 lakh equity shares worth Rs 200 m and over 1.4 m convertible warrants worth Rs 200 m, according to the company filing to the exchanges.

The equity shares will be allotted at Rs 138 apiece while the convertible warrants, which could be exercised into equity shares, at Rs 145 per convertible warrant.

The allotment of shares will be done at a discount of 19.7% over Tuesday's (25 June) closing price of Rs 171.9.

The fundraising plan comprises the issuance of 289,855,03 equity shares worth Rs 400 crore along with the issuance of 448,275,82 convertible warrants worth Rs 6.5 bn.

Apart from Kacholia, there are 11 other investors to whom the shares and convertible warrants will be allotted.

According to the company filing, Inox Leasing and Finance Limited, an Indian promoter group company, will be allotted 2,75,86,206 convertible warrants worth Rs 4 bn.

While we do not know why the investing guru decided to buy into the counter, there are some explanations.

#1 Renewable Energy Platform to Boost Revenue

According to media reports, the InoxGFL Group is gearing up to launch a renewables platform in collaboration with leading private equity players. This new platform will produce over 1.5 GW of wind and solar power, with Inox supplying the wind energy equipment.

The platform is projected to generate an additional Rs 100 to 120 bn in revenues for Inox Wind over the next 3-4 years.

Additionally, Inox Green is expected to secure yearly contracts worth around Rs 1.5-2 billion. The platform could be launched within the next 3-6 months.

This anticipated boost in revenue through the new platform can be one of the reasons why Ashish Kacholia decided to buy a stake.

#2 Niche Market Edge

Ashish Kacholia's interest in Inox Green Energy could stem from its distinctive niche in the renewable energy sector. Unlike its competitors who offer a buffet of renewable energy solutions, Inox Green has chosen a laser-like focus - Wind Turbine Generator (WTG) Operations and Maintenance (O&M) for wind farms.

This strategic decision offers a multitude of advantages, positioning Inox Green as a valuable partner for wind farm owners seeking unparalleled expertise and efficiency.

Furthermore, Inox Green's niche approach fosters a distinct market position. The wind energy sector is vast and ever-evolving, but O&M remains a crucial yet specialized function within it.

By becoming the go-to service provider for wind farm O&M, Inox Green caters specifically to a segment that prioritizes expertise and efficiency in maintaining their wind turbines.

This targeted approach allows them to build a strong reputation within the wind energy industry and potentially forge strategic partnerships with wind turbine manufacturers, like their parent company Inox Wind.

Such partnerships can provide Inox Green with preferential access to spare parts and technical support, further solidifying their position as a leader in wind farm O&M services.

#3 Strong Growth Prospects

Inox Green Energy stands poised for robust expansion, driven by its strategic focus on the O&M business of inactive or stressed players managing approximately 10 GW of capacity.

This sector represents a significant avenue for IGESL's inorganic growth, particularly among retail customers.

Leveraging its established customer base and synergies within the group, Inox Green plans to aggressively expand its portfolio by approximately 1,000 MW annually from FY24 to FY26, reaching a cumulative total of 3,000 MW.

This growth strategy combines organic initiatives with strategic acquisitions to bolster market presence and operational scale.

Furthermore, Inox Green aims to enhance its portfolio through the establishment of new long-term O&M contracts with customers who purchase Inox Wind's WTGs.

The company also intends to optimize its operations by revising or resetting shared services O&M contracts and introducing value-added services, thereby augmenting revenue streams and solidifying its leadership in the wind energy sector.

These initiatives underscore Inox Green's commitment to sustainable growth and market leadership in renewable energy services.

The anticipated strong growth prospects could have influenced the investor's decision.

A Close Look at its Financials

Between financial years 2022 to 2024, Inox Green Energy experienced a compound annual growth rate (CAGR) growth of 9.6% in revenue.

The net profit of the company saw a shift from net losses in the first two years to a net profit in 2024. This suggests Inox Green Energy is finding its footing and achieving financial stability.

Inox Green Energy's Financial Snapshot (2022-24)

Particulars	31-Mar-22	31-Mar-23	31-Mar-24
Revenues (Rs in m)	1,722.0	2,542.3	2,242.6
Revenue Growth (%)	-	47.6	-11.8
Net Profit (Rs in m)	-50.0	-204.0	276.7

Source: Equitymaster

Additionally, the company successfully achieved its goal of becoming debt-free by the end of FY24. This involved strategically selling off various special purpose vehicles (SPVs), generating significant cash flow, and transforming Inox Green into a net cash-positive company.

The company's operational performance was also impressive. At the end of FY24, Inox Green's wind O&M portfolio stood at 3.3 gigawatts (GW). The machine availability for the entire portfolio FY24 was at 96.1%, which is also a significant improvement over the past year.

What Next?

The country aims to reach 500 GW of non-fossil energy capacity by 2030, there is a significant investment opportunity in the renewable energy sector. Electricity demand is expected to rise due to population growth (projected to reach 1.51 bn by 2030) and urbanization.

India's transition to a sustainable future involves ambitious targets, including reducing carbon intensity by over 45% by the end of the decade, achieving a 50% share of renewable energy in electric power capacity by 2030, and aiming for net zero carbon emissions by 2070.

Despite fossil fuels constituting 59% of the installed energy capacity, this share is expected to decrease significantly to 31.6% of the energy mix by 2030, with India steadfast in its commitment to a greener energy future.

The Union Budget for FY24 received a total allocation of Rs 102.2 bn. This marks a substantial 48% increase compared to the preceding budget, which was set at Rs 70.3 bn.

In the FY24 budget, the central government allocated Rs 35 bn to provide a viability gap funding for battery storage projects with a capacity of 4,000 MWh.

Additionally, the government has released guidelines to encourage the development of pump storage projects.

These developments will significantly bolster Inox Wind Energy's position.

How Inox Green Energy Shares Have Performed Recently

In the past one year, shares of Inox Green Energy have gained 199%. In the past five days, the stock is up 4%.

Inox Green Energy has a 52-week high of Rs 188 touched on 27 June 2024 and a 52-week low of Rs 55 touched on 5 July 2023.

It is currently trading at a PE (Price to Earnings) multiple of 471.9x, while PB (Price to Book) ratio stands at 3.8x.

About Inox Green Energy

Incorporated in 2012, Inox Green Energy Services is one of the major wind power operation and maintenance (O&M) service providers within India.

The company is a subsidiary of Inox Wind (IWL), a company that is listed, and part of the Inox-GFL group of companies.

Inox Green Energy provides exclusive O&M services for all WTGs sold by IWL through long-term contracts for terms that typically range between 5 to 20 years.

The company has a presence in Gujarat, Rajasthan, Maharashtra, Madhya Pradesh, Karnataka, Andhra Pradesh, Kerela, and Tamil Nadu.

To know more about the company, check out Inox Green Energy company fact sheet and Inox Green Energy quarterly results.

For a sector overview, read our energy sector report.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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...