Inox India opens for subscription, GMP up 67.42%; should you subscribe to the issue?

ITDC INIDA EPRESS/ ITDC NEWS: Inox India IPO: Inox India IPO opens for public subscription today and will close on Monday, December 18, 2023. The bidding for anchor investors concluded on Wednesday, wherein the company collected Rs 437.80 crore. The price band for its public issue at Rs 627-660 per equity share of face value Rs 2 each. At the upper end of the price band, the company’s promoters and shareholders seek to raise Rs 1,459.32 crore from the IPO. Ahead of the public issue, Inox India  shares’ GMP rose 67.42% over the upper end of the share price on offer.

The IPO comprises Offer-For-Sale (OFS) with promoters offloading 22,110,955 equity shares Rs 1,459.32 crore.  The company intends to use the net proceeds from the IPO to achieve the benefits of listing the Equity Shares on the Stock Exchanges. Further, the Company expects that the proposed listing of its Equity Shares will enhance the visibility and brand image as well as provide a public market for the Equity Shares in India. The Selling Shareholders will be entitled to the entire Offer proceeds after deducting the Offer expenses and relevant taxes, according to Chittorgarh.com. For potential investors, the bidding starts at a minimum of 22 equity shares, with subsequent bids in multiple lots of 22 equity shares each, with a maximum of 13 lots.

Inox India is engaged in the business of design, engineering, manufacturing, and installation of equipment and systems for cryogenic conditions. Its business consists of three divisions namely industrial gas, LNG, and cryo scientific, out of which industrial gas and LNG divisions account for majority of the revenue. The company offers standard cryogenic tanks and equipment, beverage kegs, bespoke technology, equipment, and solutions as well as large turnkey projects that are used in diverse industries such as industrial gases, LNG, green hydrogen, energy, steel, medical and healthcare, chemicals and fertilizers, aviation and aerospace, pharmaceuticals and construction.

Should you apply for the Inox India Industries IPO?

Anand Rathi: Subscribe – Long Term

“Inox India is well positioned to capture this global market growth with in-house technology as well as LNG product range that includes the entire value chain As on Sep’23, the company has an order book of Rs10,366 mn. The ‘Order Book’ comprises anticipated revenues from the unexecuted portions of existing contracts. At the upper price band company is valuing at P/E of 39.2x with a market cap of Rs 59,901 million post issue of equity shares and return on net worth of 27.79% in FY23. On the valuation front, we believe that the company is fairly priced. Thus, we recommend an ‘Subscribe – Long Term’ rating to the IPO.”

StoxBox: Subscribe

“Inox India is expected to benefit from the long-term demand for cryogenic equipment. The company’s leadership position in cryogenic equipment in India, robust order book, strong product portfolio, marquee clients diversified across sectors and focus on exports should help the company to grow its scale of operations in the future. Additionally, the company has delivered healthy financial performance in the past, focused on reduced borrowings and posted strong RoE and RoCE in excess of 25%, thereby providing confidence about its sustained business performance. The company has a track record of sustained Revenue/EBITDA/PAT performance which grew at a CAGR of 27.5%/21.9%/26.0% during the FY2021-23 period. On the upper price band, the issue is valued at a P/E of 39.2x based on FY2023 earnings which we feel is fairly valued. We, therefore, recommend a ‘Subscribe’ rating for the issue.”

InCred Equities: Subscribe

“Inox India’s IPO price band implies 1) EV/revenue of 4.8x, 2) EV/EBITDA of ~21x, and 3) a P/E of ~29x based on FY24F annualized financials. The demand for cryogenic equipment is likely to increase because of higher demand for cleaner fuels such as LNG and hydrogen, led by the focus on reducing carbon emission from conventional energy sources. The company has demonstrated consistent growth in terms of revenue and profitability. During FY21-23, its revenue/EBITDA/PAT clocked a CAGR of 27%/22%/26%, respectively. Its RoCE improved from 25.9% in FY21 to 27.8% in FY23 while the RoE improved from 25.9% to 27.8% in the same period. The order book at the end of 1HFY24 stood at Rs10.4bn (1.1x FY23 sales). We recommend ‘subscribing’ to the IPO, given the long-term opportunities in the LNG and hydrogen space, intention to capture the full value chain, expansion in international markets, and healthy financials. Downside risks: Client concentration – 47% of the company’s sales are to top-10 clients, dependence on higher exports (accounted for 62% of sales in 1HFY24), and higher input costs.”