The Bull Run in Renewable Stocks: Spotlight on Waaree Energies Limited IPO

Introduction

If there’s a massive bull run happening in India, particularly after PS (public sector stocks), it’s in the renewable stocks. This isn’t just a hunch; let’s dive into the data that reveals the impressive performance of various renewable energy companies in India.

 

 

Stellar Returns from Renewable Energy Stocks

Surprising returns have emerged from several key players in the renewable energy sector over the past year:

• Tata Power: 78%
• Adani Green Energy: 85%
• KPR Energy: 186%
• IRDA: 247%
• Sujan Energy: 136%

However, one company stands out above the rest: Waaree Energies Limited, boasting a remarkable 567% return over the past year.

Unbelievable Multi-Year Returns

The one-year performance is impressive, but the three-year and five-year returns are astonishing:

• Three-Year Return: 4776%
• Five-Year Return: 66303%

To put this into perspective, Waaree’s returns in just five years rival the returns Titan generated over decades.

The Retail Investor Phenomenon

It’s evident that there’s a significant bull run in renewable energy. But what’s driving it?

Waaree Energies Limited has garnered attention mainly from retail investors, rather than institutional investors (DIIs and FIIs). In 2020, there were just 1,200 retail investors in the company. By 2022, this number surged to 8,000, and by 2024, it skyrocketed to around 200,000. This trend indicates that Waaree Energies Limited has become a favorite among retail investors.

Upcoming IPO of Waaree Energy

Adding to the excitement, the parent company of Waaree Energies Limited, Waaree Energy, is set to launch its IPO on October 21. The gray market premium for this IPO is currently strong, and we will discuss its valuation and listing prospects later.

What Does Waaree Energy Do?

To understand the potential growth of Waaree Energy, we must first examine what the company does and how it fits into the rapidly expanding renewable sector.

A Brief History of Waaree Group

Founded in 1989 by Hitesh and Bhupendra Doshi in Mumbai, the Waaree Group initially focused on industrial instrumentation. Recognizing the growing importance of climate change, the founders pivoted in 2007 to enter the solar industry, beginning with the manufacturing of PV modules.

Market Leadership in Solar Modules

According to data from the last financial year, Waaree Energy holds the largest market share in solar module capacity in India. For the last fiscal year:

• Waaree Energy: 17%
• Renew Power: 9%
• Tata Power: Following closely.

Waaree Energy is also a leading exporter of solar modules, with its manufacturing plant in Surat contributing a substantial portion of its revenue.

Global Context and Challenges

Despite India’s growing solar capacity, it still lags behind China, which dominates the market with a 70% share of global solar module production. India’s growth is hampered by the reliance on imported raw materials like polysilicon.

However, geopolitical shifts have prompted the USA to diversify its supply chain, increasingly looking to India for solar components.

Financial Growth of Waaree Energy

The financial trajectory of Waaree Energy is impressive. In March 2020, the revenue stood at around ₹2000 crores, and by 2023, it surged to nearly ₹11,000 crores. This reflects a compounded annual growth rate (CAGR) of 54%.

• Net Profit: Grew from ₹40 crores in 2020 to over ₹1,200 crores.
• CAGR of Profit: An impressive 139%.

Despite a lower operating profit margin, the company maintains a strong return on equity at 35%.

Valuation and Market Performance

Waaree Energy’s price-to-earnings (P/E) ratio stands out at 26.7, significantly lower than its competitors like Premier Energies (P/E of 212) and Vessel Energy System (P/E of 641). This suggests Waaree is currently undervalued, presenting an attractive investment opportunity.

IPO Insights and Future Prospects

The upcoming IPO is valued at ₹4,321 crores, with ₹3,600 crores allocated for business expansion. This is a positive indicator for long-term growth. Given the current gray market premium of ₹90, investor interest is expected to remain high.

Conclusion

In summary, the renewable energy sector in India, led by companies like Waaree Energy, is on a robust growth trajectory. This is a promising time for investors, especially with the upcoming IPO. Understanding the data and the company’s fundamentals will help you make informed decisions.