Premier Energies IPO Review :The IPO of Premier Energies, a leading company working in the solar industry, has opened today on Tuesday i.e. 27 August 2024. Even before the IPO opens, there is a tremendous craze about it in the grey market. At the same time, brokerage houses are also positive about it. The brokerage believes that the company is in a better position to take advantage of the growing market of solar energy. At the same time, the valuation of the IPO also looks attractive. The focus of the Government of India is on new energy. In such a situation, there are huge growth opportunities for companies working on new energy including solar energy. This IPO will close on 29 August.
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Rating : Recommend to subscribe
Brokerage house Choice Broking has advised to subscribe to the IPO. The brokerage says that with active regulations, policy support and commitment by the government towards renewable energy, the domestic solar manufacturing market is likely to see strong growth in the mid-term. Manufacturers like PEL are well positioned to benefit from the expansion in the market with their dominant market position. Continued restrictions on trade with China by developed economies like the USA and Europe will continue to provide export opportunities for the company in the mid-term.
The brokerage says that international solar wafer and cell prices have been on a declining trend since mid-2022 and current prices may be lower than FY21 levels. The decline in raw material prices has positively impacted the company’s financial performance during FY24 and Q1 FY25. Thus, any volatility in raw material prices will be negative for the company. At the higher price band, PEL is demanding an EV/sales multiple of 4.8x, which looks attractive considering the valuation of the only listed peer (which is loss-making).
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What are the strengths of the company
• An integrated solar cell and solar module manufacturer
• A long track record in the solar module manufacturing market
• Experienced in solar cell-line production
• A diversified customer base with client relationships within India and a strong order-book overseas
• Senior Management Team led by an experienced promoter
Key risks and concerns
• A general slowdown in global economic activity
• Unfavorable government policies and regulations
• Disruption in global supply chains mainly due to geo-political tensions
• Difficulty expanding into foreign and US markets
• Delay in commissioning of expansion projects
• Unfavorable foreign currency exchange rates
• Volatility in prices of key raw materials
• Competition from Chinese imports
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Government’s focus on solar energy
Brokerage house Axis Securities says that the Indian government plans to achieve 500 GW of clean energy by CY2030, of which 300 GW will come from solar energy. Based on recent government announcements, it is estimated that India’s annual solar capacity growth is likely to double in the next 2 to 3 years. India is endowed with huge solar energy potential. About 5,000 trillion kWh of NG flows annually in India and most parts get 4-7 kWh per square meter of energy per day.
Solar PV based power can be used on a utility scale and also on a more distributed basis to meet electricity, heating and cooling demand in both rural and urban areas. Premier Energies is an integrated solar cell and solar module manufacturer with 29 years of experience. It has an annual installed capacity of 2 GW for solar cells and 4.13 GW for solar modules.
Price Band and IPO Size
Premier Energies has fixed a price band of Rs 427-450 per share for its IPO. The size of the IPO of solar cell and module manufacturer Premier Energies Limited is Rs 2830 crore. In this, fresh equity shares worth up to Rs 1291.4 crore will be issued, while 3.42 crore shares will be sold through Offer for Sale (OFS). This issue will open for anchor (large) investors on August 26.
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GMP and lot size
The unlisted stock of Premier Energies is seen at a premium of Rs 330 in the grey market, which is 73 per cent in terms of the upper price band of Rs 450. There are 33 shares in one lot size in the IPO. In terms of the upper price band, retail investors will have to invest a minimum of Rs 14,850. At the same time, retail investors can invest Rs 1,93,050 for a maximum of 13 lots.
How much reserve for whom
In the IPO of Premier Energies, 35% share has been reserved for retail investors. Whereas 50% share is reserved for qualified institutional buyers. While 15% share is reserved for non-institutional investors. Employees get a discount of Rs 22 per share in the IPO.
(Disclaimer: The views or advice on the stock are given by experts and brokerage houses. These are not the personal views of Financial Express. There are risks in the market, so take expert advice before investing.)
