What you must know about Inox India IPO?

Inox India Ltd (INOXCVA) has emerged as a global market leader in the vacuum insulated cryogenic equipment sector. The strength of the company lies in designing, engineering, manufacturing, supplying, and commissioning turnkey packaged systems. It is one of the largest manufacturers of standard and customized cryogenic equipment, for storage, distribution, and transfer of cryogens across the entire cryogenic temperature range. Broadly, cryogens include Helium, Hydrogen, Nitrogen, Oxygen, Argon, CO2, N2O, LNG, and Ethylene. Inox India Ltd (INOXCVA) has over 30 years of experience offering solutions across design, engineering, manufacturing and installation of equipment and systems for cryogenic conditions. It offers standard cryogenic tanks & equipment, beverage kegs, bespoke technology, equipment, and large turnkey projects for sectors ranging across energy, steel, healthcare, chemicals, fertilizers, aviation, aerospace, and construction. Inox India Ltd (INOXCVA) is also the largest exporter of cryogenic tanks from India. The demand for cryogenic equipment across geographies is driven by increased demand for cleaner fuels.

The business of Inox India Ltd (INOXCVA) is spread across 3 key divisions. The Industrial Gases division manufactures, supplies and installs cryogenic tanks and systems for storage, transportation, and distribution of industrial gases. These include green hydrogen, oxygen, nitrogen, argon, carbon dioxide (CO2), and hydrogen and the company also provides after-sales services. The second LNG division manufactures, supplies, and installs standard and engineered equipment for LNG storage, distribution, and transportation. It also caters to small-scale LNG infrastructure solutions suitable for industrial, marine, and automotive applications. The third division of Cryo-Scientific businesses provides equipment for technology intensive applications and turnkey solutions for scientific and industrial research involving cryogenic distribution. Being entirely an offer for sale (OFS), there will be no fresh funds coming into the company from the IPO. The IPO will be lead managed by ICICI Securities, and Axis Capital. KFIN Technologies Ltd will be the registrar to the issue.

Highlights of the Inox India IPO issue

Here are some of the key highlights to the public issue of Inox India IPO.

• The IPO of Inox India Ltd (INOXCVA) will be open from December 14, 2023 to December 18, 2023. The stock of Inox India Ltd (INOXCVA) has a face value of ₹2 per share and the price band for the book building IPO has been set in the band of ₹627 to ₹660 per share. The final price will be discovered within this band through the process of book building.
   
• The IPO of Inox India Ltd (INOXCVA) will be entirely an offer for sale (OFS) with no fresh issue portion. As you would be aware, a fresh issue tends to bring in fresh funds into the company, but is also EPS and equity dilutive. However, OFS is just a transfer of ownership and does not entail dilution of equity or of EPS.
   
• The offer for sale (OFS) portion of the IPO of Inox India Ltd (INOXCVA) comprises the sale of 2,21,10,955 shares (221.11 lakh shares approximately), which at the upper price band of ₹660 per share will translate into an offer for sale (OFS) size of ₹1,459.32 crore.
   
• The OFS selling will be by the promoter shareholders and investor shareholders. Among the promoter shareholders offering shares in the OFS are Siddharth (104.37 lakh shares); Pavan Kumar Jain (50 lakh shares); Nayantara Jain (50 lakh shares); and Ishita Jain (12 lakh shares). The remaining shares will be offered by the investor shareholders in OFS.
   
• Since there is no fresh issue component in the IPO, the OFS portion will also be the overall size of the IPO. Therefore, the overall IPO of Inox India Ltd (INOXCVA) will comprise of the sale of 2,21,10,955 shares (221.11 lakh shares approximately), which at the upper price band of ₹660 per share translates into total IPO size of ₹1,459.32 crore.

The IPO of Inox India Ltd (INOXCVA) will be listed on the NSE and the BSE on the IPO mainboard.

Promoter holdings and investor allocation quota

The company was promoted by Siddharth Jain, Nayantara Jain, Pavan Kumar Jain, and Ishita Jain. Currently the promoters hold 99.30% stake in the company, which will get diluted post the IPO to 75.46%. As per the terms of the offer, 50% of the net offer is reserved for the qualified institutional buyers (QIBs), while 35% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors. The table below captures the gist of the allocation to various categories.

It may be noted here that the Net Offer above refers to the quantity net of employee quota, if any. The anchor portion, will be carved out of the QIB portion and the QIB portion for the public will be reduced proportionately.

Lot sizes for investing in the Inox India IPO

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Inox India Ltd (INOXCVA), the minimum lot size is 22 shares with upper band indicative value of ₹14,520. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of Inox India Ltd (INOXCVA).

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Key dates for Inox India (INOXCVA) IPO and how to apply?

The issue opens for subscription on 14th December 2023 and closes for subscription on 18th December 2023 (both days inclusive). The basis of allotment will be finalized on 19th December 2023 and the refunds will be initiated on 20th December 2023. In addition, the demat credits are expected to happen on 20th December 2023 and the stock will list on 21st December 2023 on the NSE and the BSE. Inox India Ltd (INOXCVA) will test the appetite for market proxies to alternate energy stocks The credits to the demat account to the extent of shares allotted will happen by the close of 20th December 2023 under ISIN (INE616N01034). Let us now turn to the more practical issue of how to apply for the IPO of Inox India Ltd (INOXCVA).

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of Inox India Ltd (INOXCVA)

The table below captures the key financials of Inox India Ltd (INOXCVA) for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI (FY refers to Apr-Mar period)

There are few key takeaways from the financials of Inox India Ltd (INOXCVA) which can be enumerated as under

1. In the last 3 years, revenue growth has been robust and also growing. That is evident from the expansion of the revenue pool in sync with the growth in demand for the products and solutions of Inox India Ltd (INOXCVA). The focus on the domestic and the export market has helped the company to de-risk its business model substantially.
    
2. Being a proxy for alternate energy, it is the net profit margin that would really matter and that has been over 15% on a consistent basis and also showing strong traction in terms of robust return on equity (ROE) as well as robust return on assets (ROA). Like the PAT margins, even the ROE has been consistently above 25%, making it more credible.
    
3. The company has had below average sweating assets, but it may not too relevant at this juncture when the company is on a high growth path. However, it would be the key to enhancing the ROE and justifying valuations at a future date.

Let us turn to the valuations part. On the latest year diluted EPS of ₹16.83, the stock is available in the IPO at a P/E of 39.22 times. In the absence of any comparable benchmark companies in the industry, it is hard to make a peer comparison. However, on a weighted average basis, the P/E is around 44 times. However, robust PAT margins of over 15% and strong ROE in excess of 25% surely give a strong justification for the P/E. Also, the current valuation parameters are based on historical earnings, but with high sustainable growth, the P/E would be a lot more reasonable on a 1 year forward and 2-year forward basis P/E.

Let us look at some of the qualitative advantages that Inox India Ltd (INOXCVA) brings to the table. The company has shown robust growth and it brings some smart quantitative and qualitative advantages to the table. Let us first look at some of the quantitative advantages.

• Exports were 45.8% of the revenues in FY23 and above 60% in H1FY24.
• Installed capacity of 3,100 equivalent tan units (ETU), 2.4 million disposable cylinders.
• Has 1,201 domestic customers and 228 international customers
• Top line and bottom lien have grown at CAGR of over 20% in last 3 years.

Let us now turn to some qualitative factors favouring the company.

• Strong management quality huge manpower spent on the job
• Emerging as an interesting proxy for the emerging alternate energy space
• Mix of products and solutions taking the output closer to outcomes

It is a high return business and works best when technology is leveraged. The valuations may look on the higher side, but this is a niche business with high growth potential. The IPO is suited for any investor looking for a proxy to the alternate energy space in India. However, the risks are high and hence a longer term investment horizon would be a good choice.