The initial public offering (IPO) of ACME Solar Holdings opens for bidding on Wednesday, November 6. The company is offering its shares in the price band of Rs 275-289 per share, for investors can apply for a minimum of 51 equity shares and its multiples thereafter. Issue shall close for bidding on Friday, November 8.
Incorporated In June 2015, ACME Solar Holdings is an Indian electricity producer from renewable energy sources. It is one of the largest producers of electricity from wind and solar energy in India. The company specializes in the development, construction, ownership, operation and maintenance of large-scale renewable energy projects.
The Rs 2,900 crore IPO of Acme Solar Holdings includes a fresh share sale of Rs 2,395 crore and an offer-for-sale (OFS) of up to 1,74,74,049 equity shares worth Rs 505 crore by its promoter entity ACME Cleantech Solutions. Shares of Acme Solar shall be listed on both BSE and NSE on Wednesday, November 13.
The net proceeds from the issue shall be utilized towards funding the repayment/prepayment, in full or in part, of certain outstanding borrowings availed by the Subsidiaries; and general corporate purposes. Proceeds from the OFS shall go to the selling shareholders of the company.
Ahead of its IPO, ACME Solar has raised a total of Rs 1,300.5 crore from anchor investors by allocating them about 4.5 crore shares for Rs 289 apiece. Its anchor book included marquee names like Abu Dhabi Investment Authority, Goldman Sachs, Morgan Stanley, Nomura, Societe Generale, HSBC Global, BNP Paribas Funds, CLSA Global, Eastspring Investments and more.
ACME Solar achieves this through its in-house engineering, procurement and construction (EPC) division and operations and maintenance (O&M) team. Its revenue is generated by selling electricity to various customers, including plants supported by the central and state governments. It had a total operational project capacity of 1,320 MW in solar power projects as of FY24.
It had a contracted project capacity of 1,650 MW, comprising 1,500 MW (2,192 MWp) of solar power projects and 150 MW of wind power projects. In addition, the awarded project capacity under construction amounted to 2,380 MW, consisting of 300 MW of solar power projects, 830 MW of hybrid power projects and 1,250 MW of FDRE power projects.
For the quarter ended on June 30, 2024, ACME Solar reported a net profit of Rs 1.39 crore with a revenue of Rs 340.01 crore. The company had clocked a net profit of Rs 697.78 crore with a revenue of Rs 1,466.27 crore for the financial year ended on March 31, 2024. The company will command a total market capitalization of about Rs 17,486.81 crore.
The company has reserved shares worth Rs 10 crore for the eligible employees of the company, who will get a discount of Rs 27 per share. Of the net offer, 75 per cent shares have been reserved for qualified institutional bidders, while non-institutional investors will have 15 per cent of the issue. Retail bidders will get 10 per cent of the allocation in the IPO.
Nuvama Wealth Management, ICICI Securities, JM Financial, Kotak Mahindra Capital Company and Motilal Oswal Investment Advisors are the book running lead managers of the ACME Solar Holdings IPO, while Kfin Technologies is the registrar for the issue. Here's what brokerage said about the IPO of ACME Solar:
Arihant Capital Market Rating: Subscribe ACME Solar is focused on strengthening its leadership in renewable energy by expanding and diversifying its extensive project portfolio. It is having a wellestablished land bank of 1,200 acres, expanding by 450 acres to support additional DCcapacity and Solar PV module installations every 2–3 years through its manufacturing utility in Rajasthan.
"ACME Solar plans to build this capacity through an optimal mix of equity and debt, securing favorable commercial terms for sustainable growth. At the upper end of the price band, the issue is valued at a EV/Ebitda ratio of 23.32 times. We are recommending a 'subscribe' for this issue," it said.
SBI Securities Rating: Subscribe for long term ACME Solar is valued at FY24 EV/Ebitda of 20.2 times on post issue capital. The current operational capacity of ACME Solar is 1,340 MW and total capacity (including contracted & awarded projects)is 6,320 MW. Its topline has been stagnant over the last three years and has been making losses after adjusting for exceptional gains during the same period, said SBI Securities.
"However, potential for growth in sales/Ebitda is healthy as expanded capacity gets commercialized over next 2-3 years. On replacement cost basis, the company is commanding EV/MW of Rs 3.5 crore which is attractive as compared to its peers. We recommend investors to subscribe to the issue at a cut-off price for the long term," it said.
Chola Securities Rating: Neutral ACME Solar is one of the largest renewable energy independent power producers in India and among the top 10 renewable energy players in India in terms of operational capacity as of June 30, 2024. It provides end-to-end value chain capabilities and an integrated approach to developing renewable power projects by in-house project development, EPC and O&M teams, said Chola Securities.
"The company’s operations match with the Indian government's aim to increase renewable energy capacity by 500 GW by 2030, enhancing the sector's attractiveness. Post issue the promoter shareholding will come to 83.42 per cent, indicating possibility of further dilution. We have issued a 'neutral' rating for ACME Solar's IPO," Chola added.
Marwadi Financial Services Rating: Subscribe Considering the June 24 EPS of Rs 10.19 on a post-issue basis, company is set to list at a P/E of about 28 times with a market cap of Rs 17,486.81 whereas its peer, Adani Green Energy is trading at P/E ratio of approximately 201 times, said Marwadi Financial Services.
"We assign 'subscribe' rating to this IPO as the company is a large renewable energy player well positioned to capitalize on strong industry tailwinds in IPP business. Also, it is available at reasonable valuation as compared to its peer," it added.
Canara Bank Securities Rating: Subscribe for long-term While ACME’s profitability has been inconsistent due to project divestments and high capital needs, its significant pipeline of contracted projects, including FDRE solutions, highlights its long-term growth potential in a favourable policy environment, said Canara Bank Securities. However, investors need to be cautious about concerns arising out of its unsteady profitability, it said.
"Given ACME’s extensive project pipeline, strategic focus on hybrid and FDRE projects, and anticipated gains from rising renewable tariffs, the company is well-positioned to grow in a sector with strong demand fundamentals. We recommend to subscribe this issue for long-term gains," it said.
Swastika Investmart Rating: Subscribe for long-term ACME Solar operates in the renewable energy sector with a diversified portfolio across various power generation sources. After a dip in profitability in FY23, the company recently demonstrated exceptional growth with strong margins. The debt-to-equity ratio remains significantly high. IPO valuation appears reasonable, said Swastika Investmart, suggesting long-term investors to apply for it.
StoxBox Rating: Subscribe for long-term ACME Solar has an extensive portfolio across various renewable energy technologies and is constantly growing its portfolio by adding to its capacity. It has an in-house approach to end-to-end execution, completion and maintenance of its projects. This helps the company improve its efficiency and manage costs, boosting revenue and strengthening reliability, said StoxBox.
"The current issue is priced at a P/E ratio of 23.03 times on the upper price band based on FY24 earnings, which is relatively lower than its peers. Therefore, we recommend a 'subscribe' rating with a medium to long-term investment perspective for this issue," StoxBox added.