Premier Energies Limited IPO Analysis: Premier Energies Limited is set to launch its IPO with a fresh issue of ₹1,291.40 crores and an offer for sale of ₹1,539 crores, totaling ₹2,830.40 crores. The IPO will open for subscription on August 27, 2024, and close on August 29, 2024. The shares are expected to be listed on the exchange on September 3, 2024.
In this article, we will provide a comprehensive review of Premier Energies Limited’s IPO, examining its strengths and weaknesses. Stay tuned to learn more about the company and its offering.
About Premier Energies Limited
Premier Energies, founded in 1995, has 29 years of expertise in the solar industry. The company specializes in manufacturing integrated solar cells and modules, including bifacial monocrystalline PERC cells, using advanced technologies. They also offer custom solar products, execute EPC projects, provide operations and maintenance services, and independently generate solar power.
Premier Energies operates five manufacturing plants in Hyderabad, India, with an annual capacity of 2 GW for solar cells and 4.13 GW for solar modules. They cater to a wide range of clients, including independent power producers, OEMs, and off-grid operators both in India and internationally. Notable clients include NTPC, Tata Power, and others.
Premier Energies derives its revenue mainly from the sale of solar cells and modules, with additional income from EPC contracts, traded goods, and power supply. The company has experienced impressive growth, with its revenue increasing at a compound annual growth rate (CAGR) of 105.72% from FY 2022 to 2024.
As of July 31, 2024, Premier Energies’ order book totaled ₹5,926.56 crore. This includes ₹1,609.11 crore for non-DCR solar modules, ₹2,214.06 crore for DCR solar modules, ₹1,891.18 crore for solar cells, and ₹212.27 crore for EPC projects.
Industry Overview
India’s power generation capacity hit 442 GW in FY24. The government aims to expand this by 180 GW by FY28, with solar energy accounting for 65% of the growth. Solar capacity is projected to rise from 82 GW to 198 GW, increasing its share in the energy mix from 19% to 32%.
To promote solar adoption, the government has launched various initiatives. The PM Surya Ghar Muft Bijli Yojana plans to provide rooftop solar installations to 10 million households. Additionally, the PM-KUSUM scheme aims to add 34.8 GW of solar capacity in the agriculture sector, driving demand for domestic solar products.
India’s solar module manufacturing capacity surged to 72 GW in FY24, with expectations to reach 150 GW by FY28. Government policies, including Production Linked Incentives, Domestic Content Requirements, and import duties, are enhancing local manufacturing. These strategies are set to reduce import dependency and boost exports.
Financial Highlights
Premier Energies reported a notable revenue increase to ₹3,143.79 crore for FY24, up from ₹1,428.53 crore in FY23. The company achieved a significant turnaround with a net profit of ₹231.36 crore for FY24, reversing the previous year’s loss of ₹13.33 crore. This growth was driven by improved material costs, stock purchases, employee expenses, and overall revenue, despite a rise in interest costs.
The company’s earnings per share (EPS) for FY24 surged to ₹6.93, a substantial rise from the negative ₹0.38 per share recorded the previous year. This improvement in EPS has notably enhanced shareholder value and reflects the company’s strong financial performance.
In the recent June quarter of FY25, Premier Energies posted ₹1,657.36 crore in revenue, marking a 171.24% year-on-year increase. Net profit also saw an exceptional leap to ₹198.16 crore, up 532.51% year-on-year. These impressive results for just one quarter surpass the entire performance of FY23.
Ratio Performance & Segments of Premier Energies Limited
In FY24, Premier Energies reported a return on equity (RoE) of 43.73%, a notable turnaround from the negative RoE in FY22 and FY23 when the company was not profitable. The return on capital employed (RoCE) also saw significant improvement, rising to 25.65% in FY24 from 5.94% in FY23 and 3.63% in FY22, highlighting enhanced operational efficiency.
Due to the capital-intensive nature of the solar cell industry, Premier Energies’ total debt-to-equity ratio stood at 2.18 in FY24, up from 1.86 in FY23. This indicates a continued reliance on debt financing, with the company maintaining a debt-to-equity ratio of over 1 since FY22.
Premier Energies’ revenue composition in FY24 reflects a strong focus on its core solar energy business. The company earned 86.80% from manufactured goods, 8.21% from traded goods, 0.12% from power supply, 4.73% from contracts, and 0.14% from other sources. Approximately 86% of their revenue came from within India, with the remaining 14% sourced from international markets.
Competitors
Premier Energies and its listed peer, Websol Energy System Limited, have differing debt to equity ratios. For FY24, Premier’s ratio stands at 2.18, while Websol’s is 1.70. Both companies have debt exceeding their equity, reflecting the capital-intensive nature of their businesses. Although a higher ratio is typical in such sectors, Websol’s lower ratio indicates better debt management relative to Premier.
The EBITDA margin for Premier Energies is approximately 15.93% in FY24, significantly outperforming Websol, which reports a negative margin of -24.54%. This indicates that Premier Energies is more efficient in generating operating profits compared to Websol.
In terms of return on equity (RoE), Premier Energies leads with a substantial 43.73%, contrasting sharply with Websol’s -88.89%. This strong performance in RoE underscores Premier’s superior ability to generate profits from shareholders’ equity.
Overall, while Premier Energies shows stronger financial metrics compared to Websol Energy System Limited, including a higher EBITDA margin and RoE, Websol’s lower debt to equity ratio reflects more conservative leverage management.
In conclusion, Premier Energies has significantly outperformed Websol Energy System Limited across most metrics, demonstrating superior performance. Notably, Premier’s revenue is approximately 12 times larger than Websol’s. These indicators highlight Premier’s strong position and effectiveness in the industry.
Strengths
- Market Presence: Second largest integrated solar cell and module manufacturer in India with a 2 GW annual capacity for solar cells and 4.13 GW for modules, ensuring competitiveness.
- Quality & Brand Recognition: Established since 1999, known for reliable solar modules that have earned awards, enhancing brand recognition and customer trust.
- Manufacturing Experience: Expertise in solar cell production with a transition from older to newer technologies, offering a competitive edge over new entrants.
- Diverse Customer Base: Serves customers across 23 states/territories in India and internationally, with a robust order book exceeding ₹5,000 crore, ensuring revenue stability.
- Management Experience: Led by promoters with 29 years in the solar industry and a senior team skilled in solar manufacturing and business administration, providing strategic and industry insight.
Weaknesses
- Key Customer Dependency: The company relies heavily on a few key customers, with the Top 5 contributing 43.41% and the Top 10 contributing 67.03% of operating revenue. Losing a major customer could significantly impact the business.
- Manufacturing Concentration: All manufacturing facilities are located in Telangana, exposing the company to local risks and supply chain disruptions that could affect operations.
- Capacity Underutilisation: With 5 units, the company had an 80.76% capacity utilisation for solar cells and 60.29% for other products in FY24. Underutilisation can lead to higher costs and reduced margins.
- Cash Flow Issues: The company experienced negative cash flows in FY23 and part of 2024, primarily funded through borrowings. This could limit operational and growth potential.
- Narrow Product Range: The company focuses solely on solar cells and modules, making it vulnerable to changes in demand or technological advancements in these areas.
GMP
As of August 23, 2024, Premier Energies Ltd shares were trading at a 62.22% premium in the grey market. The shares were priced at ₹730, reflecting a ₹280 premium over the cap price of ₹450.
Key IPO Information
| Particulars | Details |
| IPO Size | Rs. 2,830.40 Cr |
| Fresh Issue | Rs. 1,291.40 Cr |
| Offer for Sale (OFS) | Rs. 1,539.00 Cr |
| Opening date | 27 August 2024 |
| Closing date | 29 August 2024 |
| Face value | Rs. 1 |
| Price band | Rs. 427 – Rs. 450 |
| Lot size | 33 Shares |
| Minimum Lot Size | 1 Lot (33 Shares) |
| Maximum Lot Size | 13 Lots (429 Shares) |
| Listing date | 3 September 2024 |
Promoters: Surender Pal Singh Saluja and Chiranjeev Singh Saluja.
Book Running Lead Manager: Kotak Mahindra Capital Company Limited, J.P. Morgan India Private Limited, and ICICI Securities Limited.
Registrar to the Offer: KFin Technologies Limited.
Conclusion
Premier Energies Limited has shown strong performance recently, marked by enhanced operational efficiency and a solid order book. Despite this, the company’s high levels of borrowing during slower growth periods could pressure its margins due to rising interest costs year-over-year.
As the industry experiences significant growth, bolstered by government initiatives, Premier Energies is well-positioned to capitalize on these opportunities. With its recent growth projections, the company is set to become a formidable competitor in the sector.
