Premier Energies IPO to begin in 3 days: 10 key points to know before subscribing to Rs 2,830 crore issue

Premier Energies’ initial public offering (IPO) is scheduled to open for subscription on Tuesday, August 27, and will be available until Thursday, August 29. The company aims to ₹2,830 crore through this offer.

The issue is a combination of a fresh issue of 2.87 crore shares, totalling ₹1,291.40 crore and an offer for sale of 3.42 crore shares, total ₹1,539.00 Crores.

The price range for the offer is ₹427–450 per ordinary share with a nominal value of ₹01 per unit. The net offering is 50% reserved for qualified institutional buyers, 15% for non-institutional investors and 35% for retail investors.

Retail investors have the opportunity to bid for up to 13 lots, with each lot containing 33 shares. At the upper end of the IPO price range, at ₹450, private investors must make a minimum investment of ₹14,850 per lot.

Kotak Mahindra Capital Company Limited, JP Morgan India Private Limited and ICICI Securities Limited are acting as bookrunners and lead managers for Premier Energies’ IPO, while Kfin Technologies Limited is acting as registrar for the issue.

Let’s take a look at some of the key points from the company’s DRHP report.

Objectives of the issue

The Company plans to use the net proceeds from the IPO to achieve several key objectives. A significant portion of these funds will be invested in its subsidiary, Premier Energies Global Environment Private Limited.

This investment will partially fund the construction of a 4 GW Solar PV TOPCon cell and a 4 GW Solar PV TOPCon module manufacturing facility in Hyderabad, Telangana, India. The objective of this major project is to strengthen the Company’s renewable energy manufacturing capabilities. The remaining funds will be used for general corporate purposes and support the Company’s broader operational and strategic objectives.

About Premier Energies

The company is India’s second largest integrated manufacturer of solar cells and solar modules and India’s second largest solar cell manufacturer with an annual installed capacity of 2 GW and 3.36 GW respectively as of March 31, 2024. In terms of solar cells alone, the company is also the second largest domestic manufacturer in terms of annual installed capacity as of March 31, 2024.

The Company’s business activities include manufacturing of photovoltaic cells and solar (“PV”) modules, including customized panels for specific applications, execution of EPC projects, independent power generation, O&M services related to the EPC projects undertaken by the Company and sale of other solar related products.

The company has five manufacturing facilities, all located on its own premises in Hyderabad, Telangana, India.

India’s growth in solar module manufacturing

Since FY17, India’s solar module manufacturing capacity has seen a significant expansion, increasing from 4.2 GW to 39.5 GW by the end of FY2023, representing a compound annual growth rate of 45.3%.

This capacity will be further increased to 60 GW in fiscal year 2024 and is expected to exceed the 100 GW mark by fiscal year 2028.

Benefit from market growth

As the solar module market in India is set to continue to grow due to ambitious government targets and increasing demand for clean energy, the company is looking to capitalize on this momentum. To support this expansion, a portion of the proceeds from the new issue will be used to improve production capacity.

Specifically, the company plans to commission an additional 4 GW TOPCon solar cell line and a 4 GW TOPCon solar module line.

Expanding our international presence

The company aims to expand its presence abroad, particularly in the US market, by backward integrating its production chain and setting up manufacturing capabilities outside India. As part of its expansion plans, it signed a letter of intent with an American solar manufacturer in February 2024 to develop a TOPCon solar cell manufacturing facility in the US.

In addition, in April 2024, the company signed a letter of intent with international partners to build a wafer production facility in Malaysia. The aim of these initiatives is to benefit from favorable market conditions and the “China Plus One” strategy, which promotes the diversification of production sites.

In addition, the upcoming Carbon Border Adjustment Mechanism is expected to make the European market more accessible and make the company’s expansion strategy even more viable.

Diversified customer base

The company serves a wide range of customers both domestically and internationally. In India, the company has customers in 23 states and union territories. For the financial years 2021, 2022 and 2023 and the nine months ended December 31, 2023, the total number of domestic customers was 151, 165, 193 and 164 respectively.

In comparison, the number of international customers during the same periods was 10, 8, 6 and 23 respectively. Domestic customers include Continuum, Shakti Pumps, First Energy, Hartek, Amplus KN One Power Private Limited, Solar Square, Rotomag Motors and Controls Private Limited and Madhav.

At the global level, Arka Energy Inc. (USA) is one of the company’s international customers. In the first nine months to fiscal year 2023, approximately 74.64% of the company’s revenue was generated from its top ten customers.

Order book overview

As of March 15, 2024, the company’s order backlog amounts to ₹53,620.51 million. This sum is broken down as follows:

Non-DCR solar modules: ₹11,974.98 million

DCR solar modules: ₹32,129.03 million

Solar cells: ₹8,015.92 million

EPC Projects: ₹1,500.57 million

Notably, the order book includes a significant order from NTPC received in December 2023 for the supply of 611.04 MW of bifacial solar modules. The company had initially submitted a bid to supply 152 MW but was later asked to increase the bid to 611.04 MW under a bucket-filling process.

In addition, the company has entered into a four-year module supply agreement with an Indian renewable energy producer, which includes the supply of up to 600 MW of solar modules per fiscal year with a minimum annual offtake of 300 MW starting April 1, 2026.

In April 2024, the company also signed a letter of intent to supply 500 MW of solar cells to a customer based in the United States.

Key risks

Below are some of the key risks highlighted by the company in its DRHP report:

– Premier Energies’ operating revenues are highly dependent on a limited number of customers. The loss of any of these important customers or a decrease in revenues from these customers could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.

– A growing portion of Premier Energies’ revenues come from the export of solar modules and cells, and there are plans for further expansion in this area. However, the success of these expansion plans and exports may depend on the policies implemented by the governments of the countries to which they export. Unfavorable changes in these policies could have a negative impact on the Company’s business.

– Certain subsidiaries of Premier Energies have incurred losses for the last three fiscal years and the nine months ended December 31, 2023. Further losses by these subsidiaries could have an adverse effect on the Company’s overall business, financial condition and cash flows.

Competition

Major competitors across all business segments include Waaree Energies, Mundra Solar, Jupiter Solar, Vikram Solar, Goldi Solar, RenewSys India and Websol Green Energy.

Although competition in the solar industry is expected to intensify due to the favourable regulatory environment, the company believes that its strategy of backward integration into wafers and ingots puts it well positioned to compete with these companies. It also offers a complete range of solar cells and modules and has a high level of brand recognition in India and increasingly in international markets.

Allocation and listing details

The allotment for Premier Energies’ IPO is expected to be completed on Friday, August 30, 2024. The shares are expected to be listed on both the NSE and the BSE, with a tentative listing date of September 3, 2024.

Disclaimer: The views and recommendations expressed in this article are those of individual analysts. They do not reflect the views of Mint. We advise investors to seek advice from certified professionals before making any investment decision.