IPO Analysis: Inox India Ltd

IPO Rating: Apply for the long-term

About the Issue 

The company specializes in providing comprehensive services encompassing design, engineering, manufacturing, and installation of equipment and systems tailored for cryogenic conditions. It is gearing up to launch its Initial Public Offering (IPO) for equity shares, each having a face value of Rs 2. The IPO price range is set between Rs 627 and Rs 660 per equity share, resulting in a total issue size of Rs 1,459.32 crore at the upper price band. The IPO is scheduled to commence on December 14, 2023, and will conclude on December 18, 2023. The market lot size for the IPO is 22 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 286 shares or a total investment of Rs 1,88,760 assuming the upper price band.  

Objects of the Issue 

Considering that the issue is exclusively an offer for sale, it is crucial to emphasize that the company will not directly profit from the offer proceeds. Instead, all offer proceeds will flow to the selling shareholders, distributed as per the number of offered shares they sell as part of the offer. The company seeks to harness the advantages that come with listing equity shares on the stock exchanges. 

Promoter holding 

Pavan Kumar Jain, Nayantara Jain, Siddharth Jain and Ishita Jain are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 99.30 per cent in the company.  

Company profile 

With over 30 years of experience, the company specializes in providing comprehensive solutions encompassing design, engineering, manufacturing, and installation of equipment and systems tailored for cryogenic conditions. Its portfolio includes a range of offerings, from standard cryogenic tanks and equipment to bespoke technologies, equipment, and solutions. Additionally, the company undertakes large turnkey projects that find applications in diverse industries, including industrial gases, liquefied natural gas (LNG), green hydrogen, energy, steel, medical and healthcare, chemicals and fertilizers, aviation and aerospace, pharmaceuticals, and construction. 

Moreover, the company produces a variety of cryogenic equipment crucial for global scientific research initiatives. The company achieved a significant milestone by becoming the first Indian company to manufacture a trailer-mounted hydrogen transport tank. This innovative achievement resulted from a collaborative design effort with the Indian Space Research Organisation (ISRO).

Notably, the company holds the position of being the leading supplier of cryogenic equipment in India by revenue and also stands as the largest exporter of cryogenic tanks from India, measured by revenue for the fiscal year 2023. The company boasts an extensive clientele comprising 1,255 domestic customers and 254 international customers spread across its three divisions including industrial gas, LNG, and cryo scientific. As of September 30, 2023, the company's order book stood at Rs 1,036.61 crore. 

Financials  

The company has witnessed a steady upward trend in both its top-line and bottom-line growth in recent years. Notably, the figures for Q2FY24 were particularly impressive, with a robust year-on-year growth of 16 per cent in revenue and 24 per cent in net profit. The company boasts a return on equity (RoE) and return on capital employed (RoCE) of 29 per cent and 38 per cent, respectively, for the fiscal year 2023, underscoring its robust performance. 

Valuation and outlook 

The issue is priced with a P/BV ratio of 10.8 times, calculated using its Net Asset Value (NAV) of Rs 61.06 as of September 30, 2023. When we calculate the PE ratio for the company by considering the annualized FY24 earnings relative to the post-IPO fully diluted paid-up equity capital, the resulting PE ratio stands at 29. As per its official documents, the company has asserted that, for peer comparison, there is no listed company in India of comparable size and within the same industry. With a PEG ratio below 1, it suggests that the issue is reasonably priced.

Given the inherent risks in the business, the company may encounter challenges related to the concentration of manufacturing facilities and customer dependencies, stemming from reliance on a limited number of customers and projects within a niche market. Additionally, there is a potential vulnerability tied to the dependence on export markets. 

Nevertheless, the company's prominent position as a supplier and exporter of cryogenic equipment, a resilient product portfolio crafted to meet global quality standards, and a strong emphasis on product development and engineering, coupled with sound financials, are poised to serve as key growth drivers in the future. Hence, we recommend investors to subscribe to the issue with a long-term perspective.