What you should know about Alpex Solar IPO?

Alpex Solar Ltd was incorporated in the year 1993 and it is a leading manufacturer of solar panels, using the monocrystalline and polycrystalline cell technologies. Alpex Solar Ltd offers a wide array of solar panel modules. These include bifacial, mono PERC, and Half-Cut modules. In addition, Alpex Solar Ltd  also offers solar energy solutions; comprising of AC/DC solar pumps EPC for surface and submersible categories. Some of the key clients of Alpex Solar Ltd include big names like Powergrid, BVG, Shakti Power, Luminous, Godrej Group, Hindustan Aeronautics Ltd, Solar World, Indian Oil Corporation, NTPC, Oswal Group, RRECL etc. The manufacturing facility of Alpex Solar Ltd is located in Greater Noida with adjunct offices located in Delhi, Mumbai, Himachal Pradesh, Chittorgarh, Jaipur, Tirupur, and Ludhiana. The company employs a total of 196 personnel across various verticals.

Alpex Solar IPO, one of India’s leading solar panel manufacturers, has a state-of-the-art manufacturing facility with fully automatic production line and a team of substantial man-years of experience in the renewable energy field. The company looks to align its goals with the national goals set by the Modi government of transforming India substantially into a fossil free energy supplier in the next few decades. Among its business verticals, Alpex Solar Ltd is a significant global player in the manufacture of highly specialized high-power photovoltaic modules and solar systems. The other business vertical, Alpex Exim Private Ltd has been engaged in the business of import and distribution of a wide range of specialized yarn and knitting machine components, for the textile industry for more than 20 years.

Key terms of the SME IPO of Alpex Solar Ltd

Here are some of the highlights of the Alpex Solar Ltd IPO on the SME segment of the National Stock Exchange (NSE). 
    • The issue opens for subscription on 08th February 2024 and closes for subscription on 12th February 2024; both days inclusive.

    • The stock of the company has a face value of ₹10 per share and it is a book building issue. The price for the book building issue is set in the price band of ₹109 to ₹115 per share. Being a book built issue, the price will be discovered in the above band.

    • The IPO of Alpex Solar Ltd has only a fresh issue component and no offer for sale (OFS) portion. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.

    • As part of the fresh issue portion of the IPO, Alpex Solar Ltd will issue a total of 64,80,000 shares (64.80 lakh shares), which at the upper band of IPO price of ₹115 per share aggregates to fresh fund raising of ₹74.52 crore.

    • Since there is no offer for sale (OFS) portion, the fresh issue size will also double up as the overall IPO size. Therefore, the overall IPO size will also comprise of the issue of 64,80,000 shares (64.80 lakh shares) which at the upper band IPO price of ₹115 per share will aggregate to overall IPO size of ₹74.52 crore.

    • Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 3,24,000 shares. SS Corporate Securities Private Ltd will be the market maker to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing.

    • The company has been promoted by Ashwani Sehgal, Monica Sehgal, and Vipin Sehgal. The promoter holding in the company currently stands at 93.53%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 68.76%.

    • The fresh issue funds will be used by the company towards capex for upgrading and expanding existing solar module facility and for capex of new manufacturing facility to make aluminium  frames for solar modules. Part of the proceeds will also be used to fund working capital gaps and for general corporate purposes.

    • Corporate Capital Ventures Private Ltd will be the lead manager to the issue, and Skyline Financial Services Private Ltd will be the registrar to the issue. The market maker for the issue is SS Corporate Securities Private Ltd.

IPO allocation and minimum lot size for investment

Alpex Solar Ltd has already announced the market maker allocation at 3,24,000 shares as inventory for market making. SS Corporate Services Private Ltd will be the market maker for the IPO. The net offer (net of market maker allocation) will be divided between the retail investors and the HNI / NII investors. The breakdown of the overall IPO of Alpex Solar Ltd in terms of the allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 1,200 shares. Thus, retail investors can invest a minimum of ₹138,000 (1,200 x ₹115 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 2,400 shares and having a minimum lot value of ₹276,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Key dates to be aware of in the Alpex Solar Ltd IPO (SME)

The SME IPO of Alpex Solar Ltd IPO opens on Thursday, 08th February 2024 and closes on Monday, 12th February 2024. The Alpex Solar Ltd IPO bid date is from 08th February 2024 at 10.00 AM to 12th February 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 12th February 2024.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on February 14th 2024, will be visible to investors under the ISIN Code – (INE0R4701017).

Financial highlights of Alpex Solar Ltd

The table below captures the key financials of Alpex Solar Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years. 
    • The revenues have grown at a steady p[ace in the last 2 years and hence the latest year revenue data shows a secular growth trend, which is a positive signal. Hence CAGR growth over two years is also robust at double digits. The PAT margins are relatively low, but that is more due to front-ending of outlays with profits likely to follow with scale.

    • While net margins of the company have been relatively volatile and rather low, it is more because the costs have been front-ended. However, the ROE and return on assets in the latest year are very attractive and also stable, if you normalize the variation in the previous year FY22. 

    • The asset turnover ratio or the sweating ratio has been above 1.50 and that is a good sign that sales have picked up to cover the asset outlays. With scale, the impact should be visible on profits too. However, with ROA attractive, lower sweating is still sustainable. 
 

The company has latest year EPS of ₹2.10 and even through previous data may not really be comparable, the weighted average EPS of last 3 years stand at ₹1.38. The latest year earnings are being discounted by the IPO price at 54-55 times P/E ratio. One has to look at the P/E ratio from two perspectives. Firstly, the half year EPS for FY24 is much higher at ₹4.22, which makes the valuations look a lot more reasonable if the EPS is annualized and extrapolated. However, the real story is that the story becomes a lot more enticing once the economies of scale start to reflect on the bottom line numbers. That is likely to take some time, but this is an area that is worth betting on for the next 10-15 years. Investors with a higher risk appetite and a longer time frame can surely look at this IPO.