ACME Solar Holdings IPO analysis

ACME Solar Holdings IPO (initial public offering) will open for subscription on November 6, 2024 and close on November 8, 2024. Below is a breakdown of the renewable power producer's strengths, weaknesses and growth prospects to help investors make an informed decision. ACME Solar Holdings IPO in a nutshell Quality: Between FY22-24, ACME Solar Holdings reported a three-year average ROE and ROCE of nearly 11 and 7 per cent, respectively. Growth: During FY22-24, its revenue declined around 6 per cent per annum while net profit jumped over two times during this period as a result of exceptional items. Valuation: After listing, the stock will trade at a P/E and P/B ratio of 28 and 4 times, respectively. Overview: A global transition to clean energy sources is driving demand for renewable energy solutions, which should help the company scale up. However, intense competition and lack of pricing power in the industry remain key challenges for the company. About ACME Solar Holdings Established in 2015, ACME Solar Holdings is a power generation company that primarily deals in renewable energy sources. Its portfolio consists of solar, wind, and hybrid renewable energy projects and it has an operational capacity of 1,340 MW. The company currently has under-construction projects with a capacity of 5,020 MW. Its projects are located in 11 states including Gujarat, Rajasthan, Madhya Pradesh, Andhra Pradesh, Karnataka, and Tamil Nadu, among others. Strengths of ACME Solar Holdings Integrated operations: The company's operations are vertically integrated as it has in-house engineering, procurement, and construction (EPC), and operation and maintenance (O&M) teams, which ensures cost savings. Weaknesses of ACME Solar Holdings Recurring losses: The company has incurred losses in FY22 and FY23. On the books, it reported profits in FY22 due to exceptional items of Rs 330 crore. Against its reported return on equity (ROE) of 30 per cent in FY24, the ROE actually works out to be less than 10 per cent on excluding exceptional items from the profit figure. ACME Solar Holdings IPO details Total IPO size (Rs cr) 2,900 Offer for sale (Rs cr) 505 Fresh issue (Rs cr) 2,395 Price band (Rs) 275-289 Subscription dates November 6-8, 2024 Purpose of issue To repay debt Post-IPO M-cap (Rs cr) 17,486 Net worth (Rs cr) 4,337 Promoter holding (%) 83.4 Price/earnings ratio (P/E) 28.3 Price/book ratio (P/B) 4.0 Financial history Key financials 2Y CAGR TTM FY24 FY23 FY22 Revenue (Rs cr) -5.8 1,259 1,319 1,294 1,487 EBIT (Rs cr) 6.1 744 781