IPO Spotlight: Evaluating a company with 104 per cent CAGR revenue growth

The June quarter performance was also remarkable, reflecting a 242 per cent net profit growth from FY24 if annualized.

About the Issue  

Premier Energies Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details.

Objects of the Issue  

The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:

1. Investment in the subsidiary, Premier Energies Global Environment Pvt Ltd for part-financing the establishment of a 4 GW Solar PV TOPCon Cell and 4 GW Solar PV TOPCon Module manufacturing facility in Hyderabad

2. General corporate purposes

Promoter holding 

Surender Pal Singh Saluja and Chiranjeev Singh Saluja are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 91.25 per cent in the company.

Company profile  

The company is a leading integrated manufacturer of solar cells and modules, with nearly 30 years of experience in the solar industry. Its product portfolio encompasses solar cells, solar modules, monofacial and bifacial modules, EPC solutions, and O&M solutions.

The company operates five manufacturing facilities, all located on its own land in Hyderabad, India. Together, these facilities have an annual installed capacity of 2 GW for solar cells and 4.13 GW for solar modules.

As of July 31, 2024, the company had an order book of Rs 5,926.57 crore. Its key customers across various business segments include NTPC, Tata Power Solar Systems Ltd, Panasonic Life Solutions Pvt Ltd, Shakti Pumps, First Energy, Bluepine Pvt Ltd, and Luminous, among others.

The company has exported its products to several countries, including the United States, Hong Kong, South Africa, Bangladesh, Norway, Nepal, France, Malaysia, Canada, Sri Lanka, Germany, Hungary, the United Arab Emirates, Uganda, Turkey, South Korea, China, Taiwan, and the Philippines.

Financials  

The company has shown consistent revenue growth over the past few years, with a Compound Annual Growth Rate (CAGR) of 104 per cent from FY22 to FY24.

While profitability was impacted in FY22 and FY23, the company posted a significant profit in FY24. The June quarter performance was also remarkable, reflecting a 242 per cent net profit growth from FY24 if annualized.

In FY24, the company achieved an impressive Return on Equity (RoE) of 44 per cent and a Return on Capital Employed (RoCE) of 26 per cent.

Valuation and outlook  

The issue is priced with a P/BV ratio of 23.24 times, calculated using its Net Asset Value (NAV) of Rs 19.36 as of June 30, 2024. At the upper price cap, it is priced at a P/BV ratio of 9.62 times, considering its post-IPO NAV. 

When calculating the PE ratio for the company based on annualized Q1FY25 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 24.

The Indian government has set an ambitious target to achieve 500 GW of clean energy by 2030, with 300 GW expected to come from solar power. Recent government announcements suggest that India's annual solar capacity additions are likely to double over the next two to three years. Solar energy is a central component of India's low-carbon development strategy and a crucial factor in achieving Net Zero emissions by 2070.

Given the industry's optimistic outlook, the company's strong track record and financial performance, a solid order book, and its global presence, we recommend investors consider subscribing to the issue with a long-term perspective.