Complete Review of Today’s IPO: Waaree Energies IPO
Introduction
While reviewing today’s IPO, I am personally feeling very happy. You might be wondering why I’m feeling so happy! If I’m happy, there must be a good reason that will make you feel the same way. Let me share the reason for my excitement.
India’s Biggest IPO This Week
First, let’s look at what’s in front of us right now. This week, India’s biggest IPO opened, and a lot has happened since. Initially, the price band of ₹20,00,000 was announced, and the grey market premium started running at ₹800. Everyone started saying, “The price should be ₹2,000,” and eventually, the IPO was priced at ₹2,000.
At first, the expectation was that the price band would be around ₹1,200. But as soon as top management realized that the market value had increased, they considered reducing it from ₹20,00,000 to ₹1,500. They said, “Forget ₹1,500, take everything you’re getting,” which meant they didn’t leave much on the table for investors and traders. From a valuation perspective, there isn’t much scope for listing gains.
Ray Energy Limited IPO Overview
Now, coming to the IPO I’m going to review today. The company is Ray Energy Limited. If you check the unlisted market price today, it’s around ₹2,700. Initially, they planned to launch the IPO at ₹10. Despite knowing that their price in the unlisted market was higher, they stuck to their original pricing, meaning there’s an automatic difference of ₹1,200 compared to the unlisted market.
Grey Market Premium
Today’s grey market premium is ₹1,65,990. According to grey market sources, the expected profit for retail investors is around ₹9,000 per lot, while High Net-Worth Individuals (HNI) can expect a profit of around ₹35,000 per lot. This data comes from sources, and it shows that if a company leaves enough money on the table for investors, retail investors appreciate it and get more involved.
The grey market premium indicates that people are feeling good about this IPO. I hope this initial introduction gets you excited about the IPO as well.
No Investment Advice
I do not give investment advice or tips here. I only try to present the available information in a clear and accessible way. Please consult your financial advisor before taking any actions.
Company Background
Ray Energy Limited was incorporated in December 1990, even before I was born! The company is an Indian manufacturer of solar PV modules. Currently, it has an integrated capacity of 12 GW.
IPO Details
- Opening Date: 21st October
- Closing Date: 23rd October
- Allotment Date: 24th October
- Refund Date: 25th or 26th October (there could be a one-day delay)
- Tentative Listing Date: 28th October (on Dhanteras)
This means if you are lucky enough to get an allotment, it could feel like Goddess Lakshmi herself is visiting your home! The IPO size is large, which increases your chances of receiving allotment.
If you want to open a free Demat account in the name of a family member, you can find the link in the description with additional benefits.
IPO Size
- Total Issue Size: ₹4,321 crores
- Fresh Issue: ₹3,600 crores
- Listing: NSE and BSE
- Retail Quota: 35%
- Price Band: ₹1,427 per share (with a face value of ₹10)
Financial Performance
- Total Assets: ₹12,000 crores
- Revenue Growth: 70% growth from FY 2023 to FY 2024
- Profit After Tax Growth: 155% growth from FY 2023 to FY 2024
Financial Analysis
The financials look strong right before the IPO, but that also raises concerns. Sometimes companies show remarkable growth just before going public, which could be a red flag. The current valuation gives a Price-to-Earnings (P/E) ratio of 26, making this IPO look reasonable. However, the sharp increase in profits before the IPO should make investors cautious.
Key Risk Factors
- Customer Concentration: In FY 2023, 70% of the company’s revenue came from its top 10 customers. By June 2024, this had reduced to 58%, but the concentration is still high, posing a risk.
- Liquidated Damages Clause: The company has a history of paying liquidated damages for not meeting contractual terms. This is an important risk.
- Export Dependency: In FY 2024, 57% of total revenue came from exports. This heavy reliance on foreign markets poses a risk in case of changes in international demand or regulations.
Use of IPO Proceeds
- Financing Costs: The company will use part of the IPO proceeds to reduce the financing costs for its plant.
- New Plant Setup: The funds will also be used to set up new plants. However, there’s a risk if the setup underperforms.
- General Corporate Purposes: The remaining funds will be used for general corporate purposes.
Valuation Ratios
- Return on Equity (ROE): 28.5%
- Return on Capital Employed (ROCE): 29.5%
- Debt to Equity Ratio: 0.06 (almost zero-debt company)
- Earnings Per Share (EPS): ₹56
Peer Comparison: Waaree Energies IPO
When comparing Ray Energy Limited with its peers, the company appears reasonably priced. A significant competitor, Waaree Energies IPO, is also a major player in the solar energy sector. Waaree Energies is currently operating at a higher valuation, but Ray Energy’s P/E ratio of 26 makes this IPO more attractive in comparison.
Conclusion
This is the basic review of Ray Energy Limited’s IPO. We’ll keep an eye on how the anchor book performs. Personally, I am very interested in this IPO and plan to study it further. The grey market is also giving us a positive response, which makes this IPO even more exciting.
If you don’t already have a Demat account, now is the time to open one to avoid last-minute issues. All the important links are in the description, including those for mutual fund investments.