3:1 Bonus: Wind Energy Stock Gained By 15% On Raising Rs 900 Crore, To Be Debt-Free; Axis Sec Says BUY

Inox Wind Ltd, a midcap energy stock, rallied by over 15% on July 4 as the company will achieve debt-free status. This optimism comes after Inox Wind raised Rs 900 crore from its promoter Inox Wind Energy Limited (IWEL). Inox Wind which recently distributed 3:1 bonus shares, is recommended to buy by Axis Securities.

Inox Wind Share Price:

Inox Wind share price ended at Rs 157 apiece, up by 10.3% on BSE after market hours of July 4th. The stock rallied by at least by 15.2% in the day, hitting an intraday high of Rs 164 apiece.

The stock is near its 52-week high of Rs 177 apiece. YTD, the stock is up by 20%.

Inox Wind Debt Free:

Inox Wind announced that Inox Wind Energy's promoters completed the infusion of Rs 900 crore in the company. The funds were raised by IWEL on May 28, 2024, through the sale of equity shares of IWL through block deals on the stock exchanges, witnessing the participation of several marquee investors.

Inox Wind said, "The funds will be utilised by IWL to completely pare down its external term debt to achieve a net debt-free status."

Kailash Tarachandani, CEO of Inox Wind, remarked, "It has been a remarkable journey so far. This fund infusion will help us become a net debt-free company, strengthening our balance sheet and helping accelerate our growth. We expect substantial savings in interest expenses going ahead, aiding our profitability further."

Tarachandani added, "With all the building blocks in place, be it our execution capabilities, state-of-the-art technological offerings, financial strength, robust order book and a large order pipeline, we are geared up to embark on a substantial growth journey ahead."

BUY Inox Wind share price?

Axis Securities On Inox Wind:

In its latest report, Axis Securities said, "We initiate coverage of Inox Wind Limited (IWL) with a BUY recommendation and a target price of Rs 185/Share."

Axis Securities highlighted five key factors to recommend BUY on Inox Wind:

1. Strong Order Book - As of 31st Mar'24, the company has a strong order book at 2.7 GW, which will be sold for the next 2.5 years. The 2.7 GW order book is a mix of all customers, PSUs, IPPs, C&I market and retail market with a healthy mix of turnkey and equipment supplies. The company also has multiple IPP & C&I orders in the pipeline which are at advanced stages of closure.

2. Ramp-up in Execution - In FY24, the company's execution stood at 376 MW as compared to 104 MW in FY23, indicating a 262% YoY jump in execution. With the large order book, the company expects higher order execution from FY25 onwards (guidance of 800/1,200 MW for FY25/26E) with a target of 2 GW of annual execution in the medium term. The company has the capability and supply chain readiness to execute higher MWs. In FY16, it had commissioned 786 MW when the wind sector was at its peak.

3. Technological Advancement - The company has ramped up the manufacturing of 3 MW wind turbines and successfully transitioned to 3 MW wind turbines from 2 MW. It has also secured the license of a 4.X MW wind turbine platform. The 4.X MW wind turbine with a large rotor diameter for low wind sites will be a revolutionary product in India.

4. Financial Performance - The company incurred losses during FY19-24, primarily due to reduced execution linked to lower wind capacity additions. This was caused by the abrupt transition to a reverse bidding auction regime starting from FY18 and the additional impact of COVID-19 in FY21-22. We expect the company to return to profitability from FY25 onwards, driven by higher execution, which will be supported by its robust order book. We project a Revenue/EBITDA CAGR of 75% over FY24-27E and project the PAT to jump to Rs 1,081 Cr in FY27E from a loss of Rs 51 Cr in FY24. We also project an EBITDA margin of 15%, in line with the company guidance range of 14-15%.

5. Nil Interest-bearing debt on the books - The series of promoter's fund infusions (cumulative of Rs 2,940 Cr over FY23-25) through stake sales has resulted in zero interest-bearing debt for Inox Wind.

On the valuation, Axis Securities said, "With the interest-bearing debt coming down to zero, robust order book, technological readiness, and execution capability along with the government's renewed focus on wind capacity additions, we assign a target P/E multiple of 30x on our FY26 EPS estimate. We further adjust it for the promoter's fund infusion and minority stake in the Inox Green Energy Services Ltd. to arrive at our TP of Rs 185/share and initiate the coverage with a BUY rating."

Inox Wind Bonus Issue:

INOX Wind allotted a 3:1 bonus issue, meaning 3 (Three) new fully paid-up bonus equity shares of Rs. 10/- each for every 1 (One) fully paid-up existing equity share of Rs. 10/- each held.

Inox Wind Limited (IWL) is India's leading wind energy solutions provider servicing IPPs, Utilities, PSUs & Corporate investors. IWL is a part of the US$ ~ 8 BN INOXGFL Group which has a legacy of over nine decades and is primarily focused on two business verticals - chemicals and renewable energy.