ACME Solar Holdings IPO: Subscribed Opens Today, Booked 27% On Day 1; GMP Hints Muted Listing; Check

The initial public offering (IPO) of ACME Solar Holdings Ltd, a player in India's renewable energy sector, opened on Wednesday, November 6, 2024, and is scheduled to close on Friday, November 8. The Gurugram-based company's IPO price band has been set between Rs 275 and Rs 289 per share. Ahead of its public debut, ACME Solar Holdings raised a robust Rs 1,300.50 crore from anchor investors on Tuesday, November 5.

IPO Structure

ACME Solar's IPO size is Rs 2,900 crore, comprising a fresh issue of shares worth Rs 2,395 crore and an offer-for-sale (OFS) from its promoter, ACME Cleantech Solutions Private Ltd, valued at Rs 505 crore. The company has strategically structured its IPO to reserve at least 75% of shares for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Investors (NIIs), and 10% for retail investors. Additionally, shares worth up to Rs 10 crore have been allocated to employees.

Proceeds from the IPO will largely be directed toward repaying or prepaying outstanding loans at the subsidiary level, in addition to covering general corporate expenses. With Kfin Technologies Ltd as the appointed registrar, the IPO is being managed by a consortium of lead book-runners, including Nuvama Wealth Management, ICICI Securities, JM Financial, Kotak Mahindra Capital, and Motilal Oswal Investment Advisors.

Anchor Investor Backing and Subscription Status

The IPO launch on Wednesday garnered notable interest from retail investors, with the retail quota subscribed by 88% by 1:48 pm on the first day of bidding, according to data from the Bombay Stock Exchange (BSE). Overall, the IPO achieved a 27% subscription rate on day one, receiving bids for 1,56,11,814 shares against the 5,82,03,223 shares available. The non-institutional investor (NII) portion saw 9% subscription, while the QIB segment recorded 15%. Meanwhile, the employee quota attracted 45% of its designated allocation.

ACME Solar's Financial Performance

ACME Solar Holdings has positioned itself as a leader in India's renewable energy sector, focusing on the development, construction, ownership, and maintenance of large-scale solar projects. The company leverages its in-house engineering, procurement, and construction (EPC) expertise, alongside its operations and maintenance (O&M) team, to provide efficient and cost-effective solutions for clean energy generation. ACME Solar's customer base includes a range of government-backed entities, ensuring stable revenue streams through long-term power purchase agreements.

As of June 2024, ACME Solar operates 28 active projects, with 18 of these located in Andhra Pradesh, Rajasthan, and Telangana, accounting for approximately 85% of its total operational capacity. In FY24, the company's revenue grew 1.88% year-on-year, reaching Rs 1,319.25 crore compared to Rs 1,294.90 crore in the previous year. Notably, ACME Solar transitioned from a loss-making position in FY23 to recording a profit of Rs 698.23 crore in FY24.

Among its listed competitors are Adani Green Energy Ltd, with a P/E ratio of 291.7x, and ReNew Energy Global PLC, which trades at a P/E of 48.8x. While ACME Solar's financial multiples are not yet available, industry analysts view it as an emerging competitor with strong growth potential.

Grey Market Premium (GMP)

Ahead of its listing, ACME Solar's shares are trading at a grey market premium (GMP) of Rs 10, suggesting investor interest beyond the IPO price band. The current GMP implies an estimated listing price of Rs 299 per share, approximately 3.46% higher than the upper end of the IPO price range at Rs 289. However, market experts note that the GMP has shown some volatility over the past two weeks, with a high of Rs 30 and a low of Rs 0. A grey market premium generally reflects investor expectations and willingness to pay above the issue price.

ACME Solar's integrated approach to renewable energy project development, backed by its in-house EPC and O&M capabilities, positions it well within India's growing clean energy sector. The company's focus is on operational efficiency and an extensive project portfolio, particularly in regions like Andhra Pradesh, Rajasthan, and Telangana.

The renewable energy market in India continues to receive strong policy support, with government initiatives aimed at accelerating the country's transition to sustainable energy sources.

While ACME Solar's recent financial performance and profitability are promising, analysts highlight that the renewable energy industry remains capital-intensive, with heavy reliance on debt financing for expansion. The company's IPO proceeds aimed at loan repayment are expected to enhance its balance sheet strength, potentially improving its capacity to fund future projects.

In a statement from Investorgain.com, analysts expressed cautious optimism regarding ACME Solar's valuation, emphasizing that the GMP of Rs 10 reflects modest investor enthusiasm compared to prior peaks. Investors are encouraged to consider the company's long-term growth prospects within the renewable energy sector while factoring in the inherent risks of capital-intensive operations.