We recommend subscribing to Inox Wind’s initial public offering (IPO). We expect the company’s wind turbine generator (WTG) sales to increase from 330 MW in FY14 to ~600 MW in FY15 and 1-1.2 GW in FY16.
Inox is India’s fourth-largest WTG manufacturer and provides turnkey solutions for wind farm projects. Contribution of group companies to revenue has declined from 100% in FY12 to 15% in FY14. Group companies now contribute just 4% to the order book. The company has relationships with several large utilities including Tata Power, Continuum Wind, Clean Wind Power (Hero Group), and ReNew Power; and bagged several large sized orders in FY15. Order book as at December 2014 stood at 1,258 MW, and cumulative installations / supplies stood at 1,044 MW.
Expansion at MP, coupled with capacity augmentation at Gujarat, will lead to near-doubling of capacity to 1.6 GW by end FY16. Project site pipeline currently stands at 4 GW and R200 crore is being invested to set up the power evacuation infrastructure at these facilities. We believe this provides a robust foundation to accelerate growth.
The O&M business provides interesting opportunities, given that the supplier retains O&M on nearly 100% of the projects, and gross margins are remunerative at ~50%. Going forward, the contribution will increase meaningfully, as the installed base increases. In the WTG business, gross margins are likely to sustain at 26%.