Business of Inox Green Energy ☀️
Shaping the future?
Incorporated in 2012, Inox Green Energy Services Limited is one of the major wind power operation and maintenance ("O&M") service providers within India. The company is a subsidiary of Inox Wind Limited ("IWL"), and part of the Inox GFL group of companies.
This means that when Inox Wind sells turbines, Inox Green Energy's services are offered along with it, typically for set periods. The fee is fixed with 5 per cent escalation every year.
Fun Fact : Inox Green Energy Services lists below IPO price. Stock lists at 7% below its IPO price. The stock was listed at ₹60.50 against the issue price of ₹65 and closed 9% lower at ₹59.10.
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INOX Green Energy is a strong portfolio player with 3.2 GW of assets under management with long-term contracts of 5-20 years. They are India’s only listed pure-play renewable O&M service company.
Since operation and maintenance (O&M) is essential for wind farms, the company has never faced any cancellation of contracts from its customers too which inturn provides reliable & stable cash flows.
Machine availability at > 97% in Q4 FY24.
They are targeting to reach 6 GW portfolio by FY26 (double their portfolio in 2 years)
Natural beneficiary of the Wind Turbine Generator (WTG) business of parent Inox Wind Ltd.
Significant organic and inorganic growth opportunities.
Macro view of renewable energy in India
Government of India has a clear focus on ‘clean’ and ‘green’ energy – Driven by the Prime Ministers vision.
Strong power demand trajectory requires capacity addition – India’s power demand growth is expected to increase by at least a 5-6% CAGR.
Renewables: Cheapest source of power with low gestation.
Overall picture of renewable energy with capacity targets and CAPEX -
Potential of O&M market in India -
Financial Analysis of the company
Current portfolio: Greater than 3.2 GW.
Stable and sticky EBITDA margins of ~50% with an asset-light model.
They are participating in PSUs tenders and looking to acquire more players to expand their O&M portfolio.
Also, working on putting their building blocks in place to able to take larger portfolio with a parent execution ramping up. The same should start
flowing in our P&L with a lag of one to two quarters.
The company gets directly benefitted through O&M, as inox wind increases it’s scale of execution.
Financial KPI’s
Machine availability for the portfolio averaged 97.05% in Q4 FY24 & 96.1% in FY24.
Revenue of 84.1 in Q4 FY24 vs 60.5 in Q3 FY24. (in Rs. Cr)
EBIDTA of 46.5 in Q4 FY24 vs 23.7 in Q3 FY24. (in Rs. Cr)
PAT of 21.6 in Q4 FY24 vs 0.8 in Q3 FY24. (in Rs. Cr)
Great news by company
Side Note : They have taken over 51% of the majority stake in I-Fox and also in Resowi recently, which are leading and renowned independent O&M service providers, having a very large customer base with a wide range of capabilities to offer multi brand O&M and special services to customers.
I-Fox Windtechnik receives LoA from NLC India for restoration of 33 Wind Turbine Generators.
The Order size is 39.5 Cr. This is a value added services contract which will add to the revenues for FY25.
Guidance given by the company
They have guided for 6 GW within 2026. The larger vision remains to make just a 10 GW platform at the earliest.
A vision of making it a 500Cr EBITDA business.
Conclusion
No future Capex ever which could very well mean this company is cashflow machine. Dividend policies in place for with that cashflow.
Margin guidance will remain the same ~50% in the future too.
Company from Net cash negative has turned positive.
Due to acquisition, they are planning on expanding outside India.
CMP : Rs 133.9.
Market Cap : 3931 Cr.
Full disclosure : Invested. Please do your own due diligence.
I hope this write up helped you understand the business of Inox Green Energy in a holistic manner. If you enjoyed reading this, learnt something and have any feedback or insights, please share by leaving a comment below 👇
Thank you for reading and keep learning.
Cheers,
Arjun.
The above fundamental analysis of the company is done by a lot of research and reading through Con-call transcripts, Investor Presentations, and Annual Reports.
Source for the above is Screener, Con-calls and Website.
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Any idea from you on how to exit these positions would be really helpful