Premier Energies IPO opens in 3 days: 10 key points to know before you subscribe to ₹2,830 crore issue

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

The issue consists of a fresh issue of 2.87 crore shares aggregating to ₹1,291.40 crore and an offer for sale of 3.42 crore shares aggregating to ₹1,539 crore.

The price band for the IPO has been fixed at ₹427–450 per equity share, with a face value of ₹1 each. The net offer reserves 50% for qualified institutional buyers, 15% for non-institutional investors and 35% for retail investors.

Retail investors can submit bids for up to 13 lots, with each lot containing 33 shares. At the upper end of the IPO price band of ₹450, the minimum investment required is ₹14,850 per lot.

Kotak Mahindra Capital Company Limited, J P Morgan India Private Limited, and ICICI Securities Limited are the book-running lead managers of the Premier Energies IPO, while Kfin Technologies Limited is the registrar for the issue.

Let us see some key points from the company's DRHP report.

Objectives of the IPO

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

This investment will partially finance the establishment of a 4 GW solar PV TOPCon cell and a 4 GW solar PV TOPCon module manufacturing facility in Hyderabad, Telangana. 

This project aims to bolster the company’s production capabilities in the renewable energy sector. The remaining funds will support general corporate purposes, aligning with the company’s broader operational and strategic goals.

About Premier Energies

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

Its business operations include manufacturing solar photovoltaic (“PV”) cells and solar modules, including custom-made panels for specific applications, the execution of EPC projects, independent power production, O&M services with respect to EPC projects executed by the company, and the sale of other solar-related products.

The company operates five manufacturing facilities in Hyderabad, all situated on its own land.

India's growth in solar module manufacturing capacity

Since fiscal 2017, India’s solar module manufacturing capacity has experienced significant expansion. It has surged from 4.2 GW to 39.5 GW by the end of fiscal 2023, reflecting a CAGR of 45.3%.

This capacity further increased to 60 GW in Fiscal 2024 and is projected to exceed 100 GW by Fiscal 2028.

Capitalising on market growth

India's solar module market is poised to grow as ambitious government targets and rising demand for clean energy drive expansion. Premier Energies aims to capitalise on this momentum by allocating a portion of the IPO proceeds to enhance its manufacturing capabilities, specifically by commissioning an additional 4 GW TOPCon solar cell and 4 GW TOPCon solar module lines.

Expanding overseas presence

The company also aims to expand its presence in the US market through strategic backward integration of its production chain and establishing manufacturing capabilities outside of India.

As a part of its expansion plans, the company signed a letter of intent in February 2024 with an American solar manufacturer to develop a TOPCon solar cell manufacturing facility in the US.

In April 2024, Premier Energies signed an MoU with international partners to establish a wafering facility in Malaysia. These initiatives aim to capitalise on favourable market conditions and the “China Plus One” strategy, which encourages the diversification of manufacturing bases.

The upcoming Carbon Border Adjustment Mechanism is expected to open up the European market, further strengthening the viability of the company's expansion strategy. 

Diversified customer base

The company serves a broad range of customers, both domestically and internationally. 

In India, the company has customers across 23 states and union territories. For the fiscal years 2021, 2022, and 2023, as well as the nine months ending December 31, 2023, the total number of domestic customers was 151, 165, 193, and 164, respectively.

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

On the global front, Arka Energy Inc (USA) is among the company's international customers. In the first nine months ending FY23, approximately 74.64% of the company's revenue was generated from its top 10 customers.

Order book overview

As of March 15, 2024, the company’s order book stands at ₹53,620.51 million. This total is categorised 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. Initially, the company had bid to supply 152 MW but was later invited to increase the supply to 611.04 MW through a bucket-filling mode.

Additionally, the company has secured a four-year module supply agreement with an Indian renewable power producer, committing to supply up to 600 MW of solar modules per fiscal year, with a minimum annual offtake of 300 MW starting on April 1, 2026.

In April 2024, the company also entered into a letter of understanding to supply 500 MW of solar cells to a customer in the United States.

Key risks

The following are some of the key risks highlighted by the company in its DRHP report.

- Premier Energies' revenue from operations relies heavily on a limited number of customers. The loss of any of these key customers or a decline in revenue from them could significantly impact the company's business, financial condition, results of operations, and cash flows.

- A growing portion of Premier Energies' income comes from the export of solar modules and cells, with 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. Any unfavourable changes in such policies could adversely affect the company's business.

- Certain subsidiaries of Premier Energies have incurred losses over the last three fiscal years and the nine months ended December 31, 2023. Continued losses in these subsidiaries could negatively impact the company's overall business, financial condition, and cash flows.

Competition

Waaree Energies, Mundra Solar, Jupiter Solar, Vikram Solar, Goldi Solar, RenewSys India, and Websol Green Energy are among its main competitors across its business verticals.

Competition in the solar manufacturing industry is expected to heat up due to the favourable regulatory environment. The company believes it is well-positioned to compete by leveraging its strategy of backward integration into wafers and ingots, its comprehensive range of solar cells and solar modules in India and, increasingly, international markets, and its brand awareness.

Allotment and listing details

The allotment for the Premier Energies IPO is expected to be finalised on Friday, August 30, 2024. The shares are scheduled to be listed on both the NSE and BSE, with a tentative listing date of September 03, 2024.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.