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Favorable winds
Inox Wind
Initiating Coverage | 1 July 2015
Sector: Capital Goods
Amit Shah ([email protected]); +91 22 3029 5126
Satyam Agarwal ([email protected]); +91 22 3982 5410
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Prices as on 1 July 2015
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset
and S&P Capital.
Inox Wind: Favorable winds
Page No.
Investment summary ..........................................................................................3
Wind energy sector at inflexion point .......................................................... 4-8
INXW: Prepped for rising wind capacity installation ................................. 9-13
Expect 65% earnings CAGR over FY15-17 .................................................. 14-16
Initiating coverage with Buy rating ........................................................... 17-18
Risks and concerns ...................................................................................... 19-20
Company background ....................................................................................... 21
Board of directors ....................................................................................... 22-23
Operating metrics .............................................................................................24
Financials and valuations ........................................................................... 25-26
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Favorable winds
Expect 65% earnings CAGR over FY15-17; re-rating imminent
n Wind energy presents a strong growth opportunity with the markets likely to
expand from 2.3GW in FY15 per annum to 4-5GW per annum in the medium term,
aided by restoration of accelerated depreciation (AD) and generation-based
incentives (GBI).
n We believe INXW is suitably placed and expect it to clock sales of 825MW in FY16
and become the number-1 player, with ~25% market share. Over FY15-17, we
expect INXW to deliver 28% volume growth.
n Earnings should grow at a CAGR of 65% over FY15-17, driven by 44% revenue
CAGR and improvement in realization. We believe a re-rating is imminent. Buy.
Wind energy sector at inflexion point: The wind energy sector in India had
witnessed a sharp fall in capacity addition from 3.2GW in FY12 to 1.2GW in
FY13, led by withdrawal of accelerated depreciation (AD) and generation-based
incentives (GBI) in March 2012. However, renewable energy is now a key focus
area for the government, which has ambitious plans to set up an installed
capacity base of 60GW in the wind energy segment by 2022 (vs 23GW as at end
FY15). We believe there are multiple tailwinds that will help drive the size of the
Indian wind energy market from 2.3GW in FY15 to 4-5GW in medium term.
INXW – prepped for rising wind capacity installation: In FY16, we expect INXW
to clock sales of 825MW and become the number-1 player, with ~25% market
share. INXW is well positioned to benefit from the wind market revival,
supported by (1) strong relationships with IPPs, (2) technology partnerships with
global leaders, (3) ready pipeline of project sites, (4) strategically located
manufacturing units, and (5) established execution track record.
Expect 65% earnings CAGR over FY15-17: We expect INXW to report 44%
revenue CAGR over FY15-17, largely supported by volume growth of 28% and
realization improvement of 8%. Operating profit is likely to witness 58% CAGR
over FY15-17, led by margin expansion of 330bp during the period. Margin
expansion to be supported by various initiatives including New product launch,
Improved logistics and supply chain benefits, Lower Royalty expense, Improved
Realizations, Recent duty benefits, etc. Driven by strong earnings growth and
debt repayment, we expect RoE to improve to 28% and RoCE to 32% in FY17.
Initiating coverage with Buy rating: INXW is well positioned to benefit from the
huge opportunity India’s wind power segment presents. We expect its revenue
to grow at a CAGR of 44% and earnings to grow at a CAGR of 65% over FY15-17.
Backed by its strong revenue and earnings growth, and robust return ratios (RoE
of 28% and RoCE of 32% in FY17E), we initiate coverage with a Buy rating. Ourtarget price of INR543 (15x FY17E EPS of INR36) implies 28% upside.
Initiating Coverage | Sector: Capital Goods
Inox WindCMP: INR425 TP: INR543 (+28%) BuyBSE Sensex S&P CNX
28,021 8,453
Stock Info
Bloomberg INXW IN
Equity Shares (m) 221.9
M.Cap. (INR b) / (USD b) 84.9/1.3
52-Week Range (INR) 495/385
1, 6, 12 Rel. Per (%) -3/-/-
Financial Snapshot (INR Billion)
Y/E March 2015 2016E 2017ENet Sales 27.1 46.1 56.4
EBITDA 4.6 8.7 11.4
Adj PAT 3.0 6.1 8.0
EPS (INR) 13.4 27.3 36.2
EPS Gr. (%) 102.0 104.1 32.7
BV/Sh. (INR) 64.8 91.5 127.6
RoE (%) 20.6 29.8 28.3
RoCE (%) 19.2 32.8 32.1
Valuations
P/E (x) 31.8 15.6 11.7
P/BV (x) 6.6 4.6 3.3
EV/EBITDA (x) 21.1 11.4 8.2
Shareholding pattern (%)
As on Mar-15
Promoter 85.6
DII 3.7
FII 3.5
Others 7.2
FII includes depository receipts
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Wind energy sector at inflexion pointMultiple tailwinds; market size to double over FY15-22
n The wind energy sector in India had witnessed a sharp fall in capacity addition from
3.2GW in FY12 to 1.2GW in FY13, led by withdrawal of accelerated depreciation (AD)
and generation-based incentives (GBI) in March 2012.n However, renewable energy is now a key focus area for the ruling BJP-led government,
which has ambitious plans to set up an installed capacity base of 60GW in the wind
energy segment and 100GW in the solar segment by 2022.
n We believe there are multiple tailwinds that will help drive the size of the Indian wind
energy market from 2.3GW in FY15 to 4-5GW in medium term.
An enabling environment is in placeThere are multiple factors supporting India’s wind energy segment: (a) the central
government’s ambitious plans (60GW of wind energy capacity by 2022), backed by
fiscal and regulatory incentives (AD and GBI), (b) finalization of feed-in tariff and
regulatory support provided by state governments, (c) inclusion of renewable
generation obligation (RGO) in the Electricity Act, (d) untapped wind power
potential of 100GW (CWET study), and (e) long-term opportunities arising from
offshore wind power installation and repowering of old WTG sites. We expect the
Indian wind market size to grow from 2.3GW in FY15 to 4-5GW in medium term.
Exhibit 1: Favorable regulatory changes to boost wind energy investment
Accelerated Depreciation (AD) Overview and Policy
§ Withdrawn in Mar 2012, reintroduced in Jul 2014 and notified i
September 2014
Impact: Brings back SME interest, Captive demand
Generation Based Incentives (GBI)
§ Withdrawn in Mar 2012, reintroduced in Mar 2013 and notified
in Sep 2013
§ INR0.50/unit incentive to generators with a cap of INR1 cr/MW,
up from Rs.0.62 cr/MW for 4-10th year
Impact: IPPs to focus on setting up new capacities
Access to low cost funding
§ National Clean Energy cess doubled to INR200/mt
§ This Fund to be used for GBI, low cost funding and green
corridors
Impact: Higher corpus available to facilitate growth
Mandatory CSR (Renewable)
§ Under new Companies Act, eligible companies have to spend 2
of its average net profit on CSR activities
§ Renewable energy / WTG qualifies under mandatory CSR spend
Impact: Demand from Corporates / PSUs to strengthen
Renewable Purchase Obligation
§ Distribution companies are required to procure a percentage o
all electricity from renewables
Impact: Aids to meet the renewable energy sourcing target of 15%
by 2020
Other incentives § Fast tracking of implementation of Green Corridor will address
evacuation constraints
§ Long term funding to infrastructure projects (up to 25 years)
§ 4% SAD on parts and RM for WTG manufacturing removed
Source: Company, MOSL
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Exhibit 2: Wind Financing Policy’s evolution
Source:Industry Reports, MOSL
To spur growth in renewable energy sector, incentives like accelerated depreciation
(AD-introduced in 1990) and gross generation incentives (GBI- introduced in 2009)
were introduced; however these initiatives were withdrawn in 2012, which led to
slump in wind energy installation and FY13/FY14 saw a muted average addition of
1.9GW per annum, down from 3GW addition in FY12. With reinstallation of these
incentives in 2014, we expect Indian wind market size to grow from 2.3GW in FY15
to 4-5GW in medium term.
The Power Ministry plans to amend the Electricity Act to introduce renewable
generation obligation (RGO), whereby conventional power plant developers would
be obligated to generate ~10% power from renewable energy sources. Successful
inclusion and implementation of the RGO norms can help the wind market to
expand from 2.3GW in FY16E to 4-5GW per annum in the medium term.
State governments also encouraging wind energyState governments hold the key for successful implementation of the central
government’s ambitious capacity installation plan of 60GW. They play a key role in
land allocation for the wind sites, evacuating power and providing grid connectivity
to the power generated from the wind sites. States have provided incentives over
and above the central government’s sops to attract investments in wind energy.
Key incentives provided by states
Feed-in tariff: Several states like Rajasthan, Madhya Pradesh, Gujarat, Andhra
Pradesh, Telangana, Maharashtra and Karnataka have provided preferential tariff
over and above MNRE’s GBI of INR0.5 per kilowatt-hour to attract investment. Some
have also increased wind power tariffs by 2-15% to attract investments. These statesare expected to witness traction and will play a critical role to achieve the aggregate
target of 4-5GW per annum.
Inclusion of RGO norms in
Electricity Act to increase
demand for renewable
power installation
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Exhibit 3: Preferential Feed in tariff (FIT) provided by states
State FiT (INR/KWh)
Andhra Pradesh 4.7
Gujarat 4.15
Chattishgarh WPD >200w/m2:6.25
WPD 201-250w/m2:5.68
WPD 251-300w/m2:5.00WPD 301-400/m2:4.17
WPD>400/m2:3.91
Gujarat 4.15
Haryana WPD 201-250w/m2:5.81
WPD 251-300w/m2:5.06
WPD 301-400/m2:4.31
WPD>400/m2:3.88
J&K CUF20% 5.80
CUF22% 5.27
CUF25% 4.64
CUF30% 3.87
CUF32% 3.62
Karnataka 4.2
Kerala 4.77
Madhya Pradesh 5.92
Maharashtra WPD 200-250w/m2:5.7
WPD 250-300w/m2:5.01
WPD 300-400w/m2:4.18
WPD>400w/m2:3.92
Orissa 4.48
Punjab 5.8
Rajasthan 5.12 (for projects in Jaisalmer, Jodhpur and Barmer
5.38 (for others)Tamil Nadu 3.51
Uttarakhand WPD >200w/m2:5.0
WPD 201-250w/m2:4.45
WPD 251-300w/m2:3.80
WPD 301-400/m2:3.05
WPD>400/m2:2.80
Uttar Pradesh 3.21; escalation of 5.71 for 10 years
West bengal Tariff cap of 5.71 for 10 years
Reduced or no VAT: Several states including Tamil Nadu, Karnataka, Maharashtra
and Gujarat have policies that eliminate or reduce value-added tax (VAT) for wind
turbine components.
Exhibit 4: VAT benefit provided to attract investments in states
State VAT rates
Tamil Nadu Reduced VAT from 14.5% to 5%
Karnataka 5.50%
Gujarat 5%
Maharashtra 5%
Source: Company, MOSL
Wheeling and banking: For wind power, wheeling charges (paid to the distribution
company to use transmission infrastructure to send power from offsite locations)for different states are in the range of 2% (Madhya Pradesh and Maharashtra) to
7.5% (West Bengal). Of the total wind energy fed to the grid in a financial year, Tamil
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Nadu allows 5% and Karnataka 2% as banked energy that can be accessed any time
during the financial year.
Green cess fund: The Maharashtra Energy Development Agency (MEDA) has created
a green cess (tax) fund. A part of this fund is used to create infrastructure for grid
connectivity with proposed wind farms. Strong evacuation infrastructure promotes
investments in wind power.
Land facilitation policy: State governments like Rajasthan, Madhya Pradesh and
Gujarat have formalized land facilitation policies to expedite wind energy projects.
Major projects get delayed mainly on account of delays in land acquisition.
Exhibit 5:
Land facilitation policy
State Land Facilitation Policy
Rajasthan Government land at concessional rates -- 10% of DLC rates, with maximum allocation of 5 Hect./MW.
The conversion charges (private land to industrial use) will be 10% of charges levied for industrial purposes under the
relevant rules.
Madhya PradeshGovernment revenue land use permission at INR1/-(token) premium per year (as per circular No. F-16-3-93-VII-2A,
dated 06-09-2010 and No. F-6-53-2011-VII-Nazool, dated 08-08-2011)
Gujarat WTGs may be set up on private land, or revenue wasteland / GEDA land, if available
MaharashtraDeveloper/Investor can be allotted Government barren land (permissible for industrial use), at declared windy sites, on
lease basis with 30 yrs agreement
Andhra Pradesh
Each eligible developer may be allocated available Govt. land to harness up to a maximum of 200mw of wind power
initially. After commissioning of 100 MW capacity Wind farms in 1st stage in the allocated Govt. land, the Government
may allocate land for another 100 MW capacity Wind Farms. The application from the developers for Government land
will be considered on a first-cum-first-served basis.
Source: Company, MOSL
India has significant untapped wind potentialAccording to the Centre for Wind Energy Technology (C-WET), India has thepotential to install over 100,000MW of wind turbines at 80meters hub height,
implying an untapped wind power potential of 78GW. Based on C-WET estimates,
India has explored only 22% of its wind power potential. This indicates strong long-
term business opportunity for domestic WTG manufacturers.
Exhibit 6: Potential v/s currently installed capacity (MW)
State / UTs Installable Potential Installed Capacity
@50 m @80 m
Andhra Pradesh 5,394 14,497 913
Gujarat 10,609 35,071 3,581
Jammu & Kashmir 5,311 5,685 -
Karnataka 8,591 13,593 2,549
Kerala 790 837 35
Madhya Pradesh 920 2,931 567
Maharashtra 5,439 5,961 4,370
Odisha 910 1,384 -
Rajasthan 5,005 5,050 3,053
Tamil Nadu 5,374 14,152 7,394
Uttarakhand 161 534 -
Uttar Pradesh 137 1,260 -
Others 489 1,833 -
Total 49,130 102,788 22,462
Source: C-WET,Company, MOSL
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Offshore and Repowering to be long-term demand driversOffshore wind: The Ministry of New and Renewable Energy (MNRE) issued a draft
policy for the development of offshore wind energy in 2013, which aims to deploy
wind farms within territorial waters (12 nautical miles). Preliminary assessments
indicate that the coastlines of Tamil Nadu (Rameshwaram and Kanyakumari) and
Gujarat have reasonably high offshore wind potential. A recent study conducted byWISE estimates Tamil Nadu’s offshore wind potential at 127GW at 80 meters height,
though this is yet to be corroborated by other studies (MNRE, 2013E). A separate
study estimates that India has the potential to develop 350GW of offshore wind
energy (PIB, 2013). Offshore wind energy offers a strong business opportunity for
INXW.
Repowering: Repowering low-capacity and aging wind turbines to improve
efficiency, or to achieve better grid integration or higher energy yield could be
another big business opportunity in India. Currently, Germany, Denmark, the US and
the Netherlands are at the forefront of the repowering movement. India’s currentrepowering potential is estimated at ~2,760MW (GWEC, 2012A), but there are
several practical challenges (involving land ownership, lack of supporting state
policies or economic incentives), which hinder the realization of this potential. Tamil
Nadu, which has several aging (older than 15 years) wind farms located in wind-rich
districts, is a state with high repowering potential. Gamesa is the first company to
implement a wind repowering project in India, “Project Avatar” in Tamil Nadu in
2011 (MNRE, 2011A).
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INXW: Prepped for rising wind capacity installation
To become number-1 player, with 25% market share
n
In FY16, we expect INXW to clock sales of 825MW and become the number-1 player,
with ~25% market share.
n
INXW is well positioned to benefit from the wind market revival, supported by (1)
strong relationships with IPPs, (2) technology partnerships with global leaders, (3)
ready pipeline of project sites, (4) strategically located manufacturing units, and (5)
established execution track record.
Well-balanced, differentiated business model
In India, 80% of the wind energy projects are executed on turnkey basis, as wind
power developers do not have in-house capabilities to undertake project
development on a large scale. INXW’s business model, however, is equally focused
on turnkey solutions and WTG supplies. While turnkey solutions contribute 48% of
its orderbook, WTG supplies constitute 52%. Its balanced business model helpsINXW to optimally utilize its organizational resources. Project execution on EPC basis
can severely constrain organizational bandwidth.
INXW provides turnkey solutions together with its wholly-owned subsidiaries, Inox
Wind Infrastructure Services Limited (IWISL) and Maruti-Shakti India Limited
(MSEIL). Its services include wind resource assessment, site acquisition,
infrastructure development, erection and commissioning, and long-term operation
and maintenance of wind power projects.
Exhibit 7: Complete solution provider to customersWind Farm Identification n Wind resource assessment to identify suitable site for a wind farm and physical assessment of the site
n Energy assessment of the site
n Identification of land including revenue, private, forest and tribal land
n Approach road and logistic feasibility
Power Evacuation n Study of power evacuation options at site
n Finalization of evacuation grid substation based on load flow study and capacity
n Land or light of way for the transmission line
Infrastructure Development n Development and construction of infrastructure for wind farm
n Land development to enable installation of WTGs
Support for all government
approvals
n Assist the customer in connection with obtaining statutory approvals necessary to install and operate the
wind farm and common infrastructure facilities including the sub-station and transmission lines
n Provide support in connection with power purchase agreements and wheeling and banking agreements
with state distribution companies
Engineering, Procurement
and Construction
n Construction of WTG tower foundations
n Supply, erection and installation of turbines
n Construction and installation of a unit sub-station and switch yard at each WTG
n Installation of an energy meter to measure electricity generated
n Pre-commissioning and commissioning of WTGs
Operation and Maintenance n 24/7 operation and maintenance of WTGs and wind farms, including preventive maintenance of WTGs,
unit sub-stations and common infrastructure facilities including sub-station and transmission lines
n Maintain spares and consumables for operation and maintenance of turbines
n Installation of supervisory control and data acquisition for order management
n Provide various manpower, including with respect to wind farm security
Post commissioning Support n Support for registration for renewable energy certificates (REC), generation based incentives (GBI) and
clean development mechanism (CDM)
n Dedicated customer relationship management for customers’ daily generation report, monthly billing and
other support
Source: Company, MOSL
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INXW has focused on the IPP segment and is the preferred partner for 8 of the top-
10 IPPs in India. Focus on IPPs and timely project execution has helped INXW to
develop strong relationships with the IPPs. The government is encouraging
renewable energy projects and targets to have an installed capacity of 60GW by
2022. Encouraged by the enabling government policies, several IPPs have firmed-up
strong capacity addition plans. Given INXW’s relationships with the IPPs, we believeit is in a sweet spot.
Its successful IPO has improved INXW’s profile as a serious player, even for several
MNC PE funds / IPPs setting up wind power projects in India. This should drive
greater acceptance and also enable the company to match market pricing against a
new entrant’s strategy of offering discounts. In the equipment supply business,
INXW is among the top-2 players in India; while the size of this segment is 15% for
the WTG industry, it is targeted to contribute 30% to INXW’s revenue in FY16.
Exhibit 7: Future plans of key IPPs in India
Key Players MW CommentsRenew Energy 500 450MW pipeline to be commissioned in 2015
Continuum Wind 145 270MW under construction,580MW under development
Mytrah Energy Limited 525 Plans to have 1,000MW installed capacity by 2017
Bharat Light and power 200 Plans to have 1,000MW installed capacity by 2019
CLP India 1,081 263MW of wind power plant are under construction
Tata Power 471 469MW wind energy assets under construction across the world
Hero Future Energies Pvt 78 Plans to have 1,000MW installed capacity by 2017
Source: Company, MOSL
Exhibit 8: Key WTG manufacturers in India with installed capacity of ~10GW
Company Installed Capacity(MW)
Product Range(KW)
Technologytie-up
Gamesa Wind Turbine Private Limited 1,500 800/850/2,000 Gamesa
GE India 450 1,500/1,600 GE
Inox Wind Ltd. 1100 2,000 AMSC- Austria
Kenersys India Pvt. Ltd. 400 2,000 Kenersys
Leitner Shiram Manufacturing Ltd. 250 1,350/1,500 WindFin B.V.
ReGen Powertech Pvt. Ltd. 750 1,500 VENSYS
Suzlon Energy Limited 3,700 600/1,250/1,500/ Suzlon Energy
Vestas Wind Technology India Pvt. Ltd. 1,000 1,650/1,800/2,000 Vestas Wind
WinWinD Power Energy Pvt. Ltd. 1,000 1,000 WinWinD,
Source: MOSL, Company
Strong order book, ready pipeline of project sites provide comfort
As of March 2015, INXW’s order book stood at 1,178MW, comprising 614MW for
the supply and erection of WTGs and 564MW for the supply of WTGs. The order
book includes executed binding contracts for 825MW and term sheets (or letters of
intent) for 432MW. Also, INXW has access to project sites in Rajasthan, Gujarat,
Andhra Pradesh, Maharashtra and Madhya Pradesh suitable for the installation of
an aggregate capacity of 4,402MW, which makes available strong ready
infrastructure to provide turnkey solutions. Robust order book and ready pipeline of
project sites provides comfort on the revenue visibility front. We expect INXW to
deliver 825MW in FY16 and 950MW in FY17.
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Exhibit 9: Order book composition – FY15
Source: Company, MOSL
Exhibit 10: Project pipeline of 4.4GW
Acquired Wind sites (MW)
Wind Sites under acquisition
process (MW)
Rajasthan 1,355 Rajasthan 1,194
Gujarat 430 Gujarat 164
Madhya Pradesh 285 Madhya Pradesh 634
Andhra Pradesh 20 Maharashtra 300
Andhra Pradesh 20
Total 2,090 Total 2,312
Source: Company, MOSL
Exhibit 11: Robust order inflow led by finalization of orders
from IPPs
Source: MOSL, Company
Exhibit 12: Turnkey segment sales to reduce, improving
organizational bandwidth to increase volumes
Source: MOSL, Company
Technology tie-ups help save on R&D cost
INXW has entered into technology tie-ups with global players to source key
components of the WTG equipment. Technology tie-ups ensure that INXW has
access to latest technology and also saves on R&D cost, which helps to keep its cost
structure lean.
n
WTG technology: INXW has licensed the technology to manufacture 2MW
WTGs in India from AMSC Austria, and has an exclusive and perpetual license in
India. In August 2014, INXW and AMSC amended the agreement to cover all2MW WTGs with rotor diameters between 85 meters and 120 meters. In
addition, INXW has a non-exclusive license to manufacture 2MW WTGs
worldwide based on AMSC’s proprietary technology. Globally, over 15GW of
aggregate production capacity operates on AMSC technology.
n Electronic control system (ECS): As per the terms of license from AMSC, INXW is
required to purchase ECS manufactured by AMSC or its affiliates.
n Rotor blade sets: INXW has a non-exclusive perpetual license from
WINDnovation Engineering Solutions GmbH, Germany.
n
Gearboxes and generators: INXW procures gearboxes from DHHI (China) and
Wikov Industry a.s. (Czech Republic), and generators from Emerson Industrial
Automation and ABB India.
Supply ofWTG, 52%
Supply and
Erection, 48
%
14120
198
630
1,162
FY11 FY12 FY13 FY14 FY15
Order inflow (MW)
100% 100% 100%87% 88%
70% 64%
13% 12%30% 36%
FY11 FY12 FY13 FY14 FY15 FY16E FY17E
Turnkey Sales (%) Equipment Sales (%)
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Strategically located manufacturing units ensure efficient cost structure
INXW manufactures the key components for WTGs in-house, which ensures cost
competitiveness, cost-effective logistics, and attractive margins. It has split its
manufacturing activities to ensure cost-efficiency. The existing rotor blade and
tower manufacturing facilities are located at Rohika in Gujarat, adjacent to a
highway to facilitate easier handling during transportation to wind sites and seaports. This location is also close to states like Rajasthan, Gujarat, Maharashtra and
Madhya Pradesh, where there is good potential for wind energy production. The
more easily transportable nacelles and hubs are manufactured in Himachal Pradesh,
which gives INXW certain tax incentives.
INXW is putting up a new integrated manufacturing facility at Barwani, Madhya
Pradesh to produce nacelles and hubs, rotor blade sets and towers. This is close to
projects in Madhya Pradesh (MP) and Rajasthan. Expansion at MP, coupled with
capacity augmentation at Gujarat would lead to a near doubling of capacity to
1.6GW by the end of FY16. On completion, total capacity would be 950 nacelles andhubs, 800 rotor blade sets, and 600 towers.
Exhibit 13: Doubling manufacturing capacity to 1.6GW by end FY16
Component(s) Plant LocationInstalled Annual
Production Capacity
Post
Proposed Expansion
Nacelles and Hubs Himachal Pradesh 550 550
Nacelles and Hubs Madhya Pradesh - 400
Rotor blade sets Madhya Pradesh - 400
Towers Madhya Pradesh - 300
Rotor blade sets Gujarat 256 400
Towers Gujarat 150 300
Source: Company, MOSL
Back-to-back warranty tie-ups with suppliers obviate provision requirement
INXW outsources raw material and components that it does not manufacture in-
house. It sources a portion of the towers required for WTGs from Fedders Lloyd
Corporation. It has a license from AMSC for the production and sale of 2MW WTGs
in India based on AMSC’s proprietary technology. It also purchases ECS
manufactured by AMSC or its affiliates for all WTGs based on AMSC technology.
INXW gets warranties from component and raw material suppliers against deficient
performance and resultant liabilities.
Shift in customer profile from individuals to IPPs augurs well for INXW
The average wind installation size in India has been increasing with the shift in
customer base from individuals (AD market) to IPPs (GBI market). The average
project size has increased from 2MW in 2009 to 7MW in 2013. Project size of 50MW
and above is becoming the norm for IPPs in India. This customer profile shift augurs
well for INXW, as its business model is focused on the IPP segment rather than the
accelerated depreciation (AD) market. It is the preferred partner for 8 of the top-10
IPPs in India. Focus on IPPs and timely project execution has helped INXW to
develop strong relationships with the IPPs. Encouraged by enabling government
policies, several IPPs have firmed-up strong capacity addition plans. Given INXW’s
relationships with the IPPs, we believe it is in a sweet spot.
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Exhibit 14: Shift in project size and customer profile in India
Source: Company, MOSL
Operation and maintenance business provides interesting opportunities
As of December 2014, 742MW produced and sold by INXW were under operation,
84MW had been erected but not commissioned, and 312MW had been supplied but
not yet erected and commissioned. Given its cumulative supplies of 1,044MW,
operation and maintenance (O&M) provides interesting opportunities. We expect
the contribution of O&M to increase meaningfully post the two-year warranty. The
equipment supplier retains O&M on 100% of the projects and the business has gross
margins of 50-55%. The typical cost for O&M stands at ~INR1m/MW per annum. We
expect the O&M business revenue to scale up from INR39m in FY14 to INR594m in
FY17 (147% CAGR).
Exhibit 15: Robust 82% CAGR expected in installed base over
FY15-17E
Source: Company, MOSL
Exhibit 16: O&M revenue to increase exponentially as
installed base increases
Source: Company, MOSL
74 7360
41
15
17 25
15
23
23
7 2
19
24
21
35
12
40
2009 2010 2011 2012 2013
50MW
154 150 274
774913
318468
742
1,516
2,428
FY13 FY14 FY15 FY16E FY17E
WTG comissioned (MW) Installed base (MW)
39 159374
594
1,212
2,802
FY14 FY15 FY16E FY17E FY18E FY19E
O& MRevenue (INR M)
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Expect 65% earnings CAGR over FY15-17
Return ratios to improve
n We expect INXW to report 44% revenue CAGR over FY15-17, largely supported by
volume growth of 28% and realization improvement of 8%.
n
Operating profit is likely to witness 58% CAGR over FY15-17, led by margin expansionof 330bp during the period.
n Driven by strong earnings growth and debt repayment, we expect RoE to improve to
28% and RoCE to 32% in FY17.
Expect revenue CAGR of 44% over FY15-17
We expect revenue to grow at a CAGR of 44% over FY15-17, led by volume CAGR of
28% and 8% increase in realization. Growth in realization would be driven by
increase in sales of the new Rotor 100 product, which provides 15% higher energy
efficiency with 5% increase in cost, and by reduction of discounts.
Exhibit 17:
Improvement in realization led by increase in salesof new product Rotor 100
Source: Company, MOSL
Exhibit 18:
Revenue to witness 44% CAGR over FY15-17 led byvolume growth and better realization
Source: Company, MOSL
Exhibit 19: Revenue mix to move in favor of newly introduced 100 metre WTG (INR B)
Source: Company, MOSL
Operating profit to post 58% CAGR over FY15-17, led by margin expansion
We expect operating profit to witness 58% CAGR over FY15-17, led by 330bp margin
expansion during the period. Operating margin would expand to 20.1% in FY17.
Management expects margin expansion to be supported by factors like (i) increase
in sales of Rotor 100 metre blades (150bp), (ii) improved supply chain/logistics,
better cost absorption, etc (130bp), (iii) improved market perception, leading to
lower discounts on pricing (100bp), (iv) gains from lower special additional duty
47.9
41.6 42.945.0
47.5
6.611.7
7.611.0 11.6
FY13 FY14 FY15 FY16E FY17E
Realization-WTG (INR M/MW) Realization-EPC (INR M)
10,589 15,66827,099
46,09856,352
73
48
73 70
22
FY13 FY14 FY15 FY16E FY17E
Revenue (INR M) Growth-YoY %
-
10
20
30
40
50
60
FY11 FY12 FY13 FY14 FY15 FY16E FY17E
93 metre 100 metre 113 Metre EPC O&M
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(100bp), and (v) lower royalty expense (50bp). Inox has to pay fixed royalty per WTG
for the first 450 WTGs with rotor diameters of 93.3 meters and 100 meters, and the
first 245 WTGs with rotor diameters of 113 meters, that it produce. Lower Royalty
payment is primarily on account of extinction of royalty payment on the 93.3 metre
product. We conservatively model margin to increase from 16.9% in FY15 to 20.1%
in FY17E, (expansion of 330bps) to factor in i)increase in competitive intensity withSuzlon getting aggressive post financial restructuring ii) INXW does not make
warranty provision as against 3% provision made by SUEL.
Exhibit 20: Margins to expand primarily on account of cost
efficiencies
Source: Company, MOSL
Exhibit 21: Operating profit to witness 58% CAGR over
FY15-17
Source: Company, MOSL
Cash flows from operations as well as free cash flows to turn positive from
FY16
Historically, INXW has witnessed negative cash flow from operations on account of
elongated working capital cycle, as net working capital (NWC) for the industry hasdeteriorated meaningfully since FY13. Collapse of the accelerated depreciation (AD)
market had resulted in an increase in the bargaining power of IPPs. We expect
INXW’s NWC, which had peaked at 196days in FY15 to normalize at 148 days in
FY17. This is because the AD market is picking up again, the willingness of banks to
fund RE projects is increasing, and the bargaining power of equipment
manufacturers is increasing. NWC normalization would drive meaningful
improvement in cash flows from operations.
Exhibit 22: Cash flow to improve led by normalization of
working capital cycle
Source: Company, MOSL
Exhibit 23: NWC to normalize with improvement in
receivables cycle
Source: Company, MOSL
18.6
11.2
16.918.8
20.1
14.2
8.410.9
13.1 14.2
FY2013 FY2014 FY2015 FY2016E FY2017E
Operating Profit Margin Net Profit Margin
1,965 1,7624,574
8,659
11,354-10.3
159.6
89.3
31.1
FY2013 FY2014 FY2015 FY2016E FY2017E
Operating Profit Growth YoY %
(1.2)
(0.9)
(3.3)
0.7
7.0
(5.1)
(1.3)
(3.0)
4.2 7.2
FY2013 FY2014 FY2015 FY2016E FY2017E
Cash flow from operation (INR b) Free cash flow (INR b)
148
161196
165
148
(3)
(4)
(2)
(4)
2
FY2013 FY2014 FY2015 FY2016E FY2017E
NWC (days) Net cash (INR b)
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Return ratios to improve
We expect return ratios to improve, led by strong earnings growth and debt
repayment. We expect RoE and RoCE to improve to 28% and 32%, respectively in
FY17.
Exhibit 24:
Robust return ratios led by strong earnings and debt repayment
Source: Company, MOSL
Exhibit 25:
NWC to improve led by better receivable cycle management
NWC (Days) FY13 FY14 FY15 FY16E FY17E
Inventories 27 63 15 15 15
Debtors Excluding Retention money 172 165 150 140 140
Loans and Advances 33 34 90 88 88
Other Current Assets 4 10 5 3 3
Total Current Assets 237 272 290 258 246
Creditors 79 98 76 80 85
Current Liabilities (excl Cust Adv) 9 12 10 6 6
Provisions 1 1 7 7 7
Total Current Liabilities 89 112 94 93 98
Core NWC 148 161 196 165 148
Retention Money - - - - -
Customer Advances 3 3 - - -
Reported NWC 145 158 196 165 148
Source: Company, MOSL
29
18 19
33 32
51
31
2130
28
FY2013 FY2014 FY2015 FY2016E FY2017E
RoCE RoE
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Initiating coverage with Buy rating
Target price of INR543 implies 28% upside
We believe INXW is well positioned to benefit from the WTG demand arising from
the government’s ambitious target to install 60GW capacity from wind energy by
2022, and WTG demand revival led by fiscal and regulatory incentives provided by
central and state government. We expect INXW to post revenue of INR46.1b in FY16
(up 70%), INR56.3b in FY17 (up 22%). We expect INXW to report not just strong
revenue growth but also report far superior earnings growth. We expect INXW to
report EPS of INR27.3 in FY16E (up 104%) and INR36 in FY17E (up 33%). Backed by
strong revenue and earnings growth and robust return ratios (RoE of 28% and RoCE
of 32% in FY17), we initiate coverage on the stock with Buy rating and target price of
INR543 (15x FY17 EPS of INR36).
Our target PER of 15x is lower than Industrials / Capital Goods players like L&T (22x
FY17E), TMX (28x FY17E), etc and is constrained by the following factors:
n INXW’s earnings are prone to volatility, given the characteristics of the wind
sector that has historically witnessed large swings in capacity additions, led by
changes in government policy. Even in most of the mature markets, the industry
has not demonstrated a secular growth characteristic.
n
Health of SEB finances remain the key concern, as SEBs have generally been
reluctant to purchase expensive source of power. Challenges like poor
investments in evacuation infrastructure, backing down in peak generation
season, non availability of adequate power banking facilities, non-compliance to
RPO obligations, etc are yet to be decisively addressed. Challenges in land
acquisition could also be a constraining factor to industry growth.
n
SUEL, a key competitor, had been impacted by constrained financial position
and post the recent fund infusions by DSA / sale of Senvion, could become
aggressive.
Exhibit 26: Exhibit 26: Key financials of WTG players in India
Revenue (INR m) EBIDTA Margin (%) PAT Margin (%)
FY12 FY13 FY14 FY15 FY12 FY13 FY14 FY15 FY12 FY13 FY14 FY15
Gamesa 22,847 11,610 35,298 NA NA NA NA NA -4.4 -19.0 1.6 NA
Vestas 17,515 5,047 7,951 NA 3.7 2.6 5.3 NA 0.8 -0.2 -1.4 NA
Suzlon 100,030 32,280 56,270 48,830 7.9 -51.1 -14.4 -3.4 -10.4 -118.4 -53.1 -48.7
Inox Wind NA 10,589 15,668 27,099 NA 18.6 11.2 16.9 NA 14.2 8.4 10.9
Source: Company, MOSL
Exhibit 27: Key financial comparison for global WTG players (USD m)
Company Name MCap Revenue EBITDA Margin (%) PAT PE (x) EV/EBIDTA (x)
CY15E CY16E CY15E CY16E CY15E CY16E CY15E CY16E CY15E CY16E
Nordex SE 2,018 2,273 2,411 8.2 9.1 78 100 26.0 20.9 9.1 7.8
Vestas Wind Systems A/S 11,370 8,731 8,704 13.8 14.2 577 600 19.6 18.8 7.9 7.7
Gamesa Corp Tecnologica SA 4,656 3,759 4,032 12.5 12.8 198 235 23.9 19.9 10.2 9.3Xinjiang Goldwind Science & Te 8,375 3,636 3,831 16.3 18.9 379 433 19.9 17.4 16.5 13.5
Source: Bloomberg, MOSL
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Exhibit 28: Comparision of Inox Wind with Suzlon (INR m)
INR M Suzlon Wind Inox Wind
FY11 FY12 FY13 FY14 FY15 FY11 FY12 FY13 FY14 FY15
Revenues 91,750 100,030 32,280 56,270 48,830 719 6,216 10,589 15,668 27,099
Less: COGS 59,700 63,920 26,160 43,351 31,380 518 4,318 7,731 12,131 20,347
Gross Profit 29,405 36,110 6,120 12,919 17,450 202 1,898 2,858 3,537 6,753
Employee Expenses 8,746 10,270 8,330 7,874 7,470 38 146 250 384 549
Other expenses 18,962 18,890 15,980 15,870 13,360 46 334 644 1,390 1,629
Exchange (Loss) / Gain 0 430 2,500 2,326 4,950 0 0 0 0 0
EBITDA 1,697 6,520 -20,690 -13,151 -8,330 118 1,418 1,965 1,762 4,575
Other Income 610 0 0 0 0 10 4 48 91 143
EBIDTA incl Other Income 2,307 6,520 -20,690 -13,151 -8,330 128 1,422 2,012 1,854 4,718
Depreciation 3,410 3,890 4,280 3,745 3,760 39 76 89 116 204
EBIT -1,103 2,630 -24,970 -16,896 -12,090 88 1,346 1,923 1,738 4,514
Interest Expense 9,488 13,740 15,320 17,850 17,660 44 152 388 460 623
PBT -10,591 -11,110 -40,290 -34,746 -29,750 45 1,194 1,536 1,278 3,892
Adjusted PAT -8,318 -10,440 -38,220 -29,890 -23,760 54 1,007 1,503 1,322 2,964
Gross Margin (%) 32% 36% 19% 23% 36% 28% 31% 27% 23% 25%
EBIDTA Margin (%) 2% 8% -52% -14% -3% 16% 23% 19% 11% 17%
EBIT Margin (%) 1% 6% -80% -27% -17% 12% 22% 18% 11% 17%
WTG Sales (MW) 1,521 1,583 252 722 454 14 120 198 330 578
- India 955 1,161 415 403 442 14 120 198 330 578
Realization (INRM/MW) 56 58 85 59 76 54 53 50
Revenues (INR M) 84,650 91,570 21,430 42,720 34,290 6,107 9,485 13,730 24,772
Installed (MW) 11,541 13,124 13,376 14,098 14,552 164 318 468 742
O&M Revenues (INR M) 7,100 8,460 10,850 13,550 14,540 33 39 159
Source: Company, MOSL
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Risks and concerns
Capital-intensive nature of the industry
The WTG business in India requires high working capital; this is evident from the fact
that setting up a 1MW wind farm typically requires INR40m of working capital.
Change in regulatory policies
In the past, withdrawal of accelerated depreciation (AD) and generation-based
incentives (GBI) led to a sharp decline in wind energy capacity addition. Any such
adverse policy changes in future can impact the business.
Non-availability of grid connectivity
Inadequate grid infrastructure is another key issue that needs to be addressed
urgently. Across most states with significant wind potential, the grid does not have
sufficient spare capacity to evacuate ever-increasing amount of wind power. The
state distribution utilities are, therefore, reluctant to accept more wind power
generation and tend to prefer thermal power generation.
SEBs’ weak financial health might impact wind power demand
State electricity boards (SEBs) and government distribution companies own nearly
95% of the distribution network. According to Power Finance Corporation,
aggregate SEB losses in 2011-12 were around INR63.5b and are projected to reach
INR116b by 2014-15. The cost of generating wind power at Rs3.7-6/kWh is relatively
high compared with predominantly coal-based conventional power (Rs3.5/kWh).
SEBs’ weak financial condition might deter them from purchasing expensive wind
power and thus impact wind power demand in future.
Exhibit 29: Commercial losses up sizably from FY08 (INR b)
Source: Company, MOSL
Non-availability of land can act as a deterrent for WTG industry
The wind energy business is land intensive—2MW of turbines require 40 acres of
land, of which actual used is 2.5 acres. To achieve annual capacity addition of 4GW,
the industry would require ~80,000 acres of land every year. However, this won’t be
easy as land availability for wind farms is a contentious issue in most states. Even for
the available privately-owned land, change of land use status from agricultural tonon-agricultural is time-consuming. Further, one needs clearances from authorities
if the land is in proximity to a protected area or forest; this is again time-consuming.
4 6
5 1
6 1
8 8
1 1 3
1 4 0
2 0 0
2 3 0
2 6 4
2 2 5
2 7 1
2 1 1
2 0 6
2 2 1
2 2 6
2 3 9
3 1 9 5
3 7
6 4 5
7 5 2 1
, 0 2 4
1 , 0 5 1
F Y 9 2
F Y 9 3
F Y 9 4
F Y 9 5
F Y 9 6
F Y 9 7
F Y 9 8
F Y 9 9
F Y 0 0
F Y 0 1
F Y 0 2
F Y 0 3
F Y 0 4
F Y 0 5
F Y 0 6
F Y 0 7
F Y 0 8
F Y 0 9
F Y 1 0
F Y 1 1
F Y 1 2
F Y 1 3
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Competitive intensity
The WISE Report estimates the aggregate WTG manufacturing capacity in India at
12GW as of August 2014 and expects the Indian wind power market to witness
annual installations of 3-5GW over the coming years. There exists intense
competition in the WTG segment. In the last few months, Suzlon has taken several
steps to put its house in order by selling stakes in non-core business, inducting a
strategic partner and refocusing on the Indian market. Suzlon has historically been
the market leader with ~50% market share. Post its recent restructuring and
liquidity infusion, it will again attempt to achieve its earlier market share.
Exhibit 30:
Top Five players command 87% of market in FY15
Source: MOSL, Company
RPO compliance might remain weak
Under the Renewable Purchase Obligation (RPO), state electricity regulatory
commissions (SERCs) are obligated by law to buy a certain percentage of electricity
from renewable energy sources. The guidelines issued in 2010 by Central Electricity
Regulatory Commission (CERC) recommended a standardized RPO target of 5% in
every state, with linear increase of 1% annually till 2020 to achieve the NAPCC targetof 15%. However, many SEBs are actually not complying with the renewable
portfolio obligations—given their poor financial health—and a few SERCs have also
lowered the non-solar RPO obligation owing to the difficulty of the states in meeting
the earlier targets. SERCs specify targets for respective states based on the
renewable energy potential.
Exhibit 31: State-wise RPO Compliance data
RPO Target Achieved
FY13 FY14 FY15
TN 9.0% 9.0% 10.0% 17.0%
Karnataka 10.0% 14.0%
Rajasthan 6.4% 7.0% 7.5% 10.0%
Gujarat 7.0% 7.0% 8.0% 7.5%
Maharashtra 7.8% 8.5% 8.5% 8.5%
Andhra Pradesh 4.8% 4.8% 4.8% 5.0%
Uttar Pradesh 5.0% 5.5% 2.0%
Madhya Pradesh 3.4% 4.7% 6.0% 3.0%
Punjab 2.8% 3.4% 3.8% 1.5%
Source: MOSL, Industry Data
No provisioning for warranties
INXW provides its customers warranties against defective components and
workmanship during the defect liability period, which is generally two years. For any
failure due to defective supply or workmanship, INXW undertakes free repair or
replacement. Also, claims for damages brought by third parties could be substantial
and could have material adverse effect on the company.
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
Mar-11 Mar-12 Mar-13 Mar-14 Mar-15
Vestas RRB Wind World Suzlon Regen Inox Others Gamesa
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Company background
Inox Wind (INXW), an Inox Group company, is India’s fourth-largest wind turbine
generator (WTG) manufacturer, with a market share of 7% in FY14. INXW
commenced operations in March 2010, and manufactures key components of WTGs
– nacelles, hubs, rotor blade sets, and towers. It provides turnkey solutions for wind
farm projects through its wholly-owned subsidiaries, and has a project site pipeline
of 4GW. Order book as at December 2014 stood at 1,258MW, and cumulative
installations/supplies stood at 1,044MW (including 312MW yet to be erected).
INXW manufactures two different WTG models with 2MW rating:
n Rotor diameter of 93 meters with hub height of 80 meters
n
Rotor diameter of 100 meters with hub height of 80 / 92 meters
INXW has a 100% subsidiary, Inox Wind Infrastructure Services, which does project
development in respect of wind power projects, including wind studies, energy
assessments, land acquisition, site infrastructure development, power evacuation,
statutory approvals, erection and commissioning, and long-term operation and
maintenance (O&M) of wind farms.
About Inox Group: The Inox Group commenced operations in 1923 and currently
operates in industrial gases, engineering plastics, refrigerants, chemicals, cryogenic
engineering, renewable energy and entertainment sectors. The Group has two
publicly-listed companies – Gujarat Fluorochemicals and Inox Leisure. The Group
employs over 8,000 people at more than 100 business units in India.
Exhibit 32: Existing and upcoming manufacturing facilities of Inox wind
Source: MOSL, Company
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Board of directors
Mr Deepak Asher, Non-Executive Director
Mr Deepak Asher, aged 56 years, is a Non-Executive Director. He has a bachelor’s
degree in Commerce and a bachelor’s degree in Law from Maharaja Sayajirao
University, Baroda. He is a fellow member of the Institute of Chartered Accountants
of India and is also an associate member of the Institute of Cost and Works
Accountants of India. He has been associated with the Inox Group for over 25 years.
He is the founder President of the Multiplex Association of India and was awarded
the Theatre World Newsmaker of the Year Award in the year 2002 for his
contribution to the cinema exhibition industry. He has been instrumental in Inox
Group’s diversification into the cinema, CDM and wind energy businesses.
Mr Devansh Jain, Whole time Director
Mr Devansh Jain, aged 28 years, is a Whole time Director. He has completed a
double major degree in Economics and Business Administration from Carnegie
Mellon University, Pittsburgh, USA. He has over six years of work experience in
various management positions. He has been spearheading Inox Group’s foray into
the wind energy sector. He is on the National Council of Indian Wind Power
Association and is Honorary Secretary of Indian Wind Turbine Manufacturers
Association. Mr Jain has been instrumental in setting up manufacturing plants in
Himachal Pradesh and in Gujarat, with technology sourced from AMSC. He has been
awarded the “Wind Power Man of the Year 2012-13” for development of integrated
wind power supply chain and project development capacity in the country by
Renewable World.
Mr Siddharth Jain, Non-Executive Director
Mr Siddharth Jain, aged 36 years, is a Non-Executive Director. He has completed his
bachelor’s degree in Mechanical Engineering from the University of Michigan – Ann
Arbor, USA and holds a Master’s degree in Business Administration from INSEAD,
France. He has over ten years of work experience in various management positions
in the Inox Group and is currently looking after new project developments at Inox
Air Products Limited.
Mr Rajeev Gupta, Whole time Director
Mr Rajeev Gupta, aged 56 years, is a Whole time Director. He holds a bachelor’s
degree in Chemical Engineering from the Indian Institute of Technology, Delhi and
has over 32 years’ experience in corporate planning, business and project
development, project management, sales, procurement and operations in
international and domestic industries. He was involved in setting up GFL’s chemical
complex at Dahej and production plants for Aditya Birla group, TOA Group of
Companies, a Thai group and Lurgi India Private Limited, subsidiary of Lurgi AG, a
German engineering company. He has more than five years’ experience in the wind
industry in various capacities.
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Mr Chandra Prakash Jain, Independent Director
Mr Chandra Prakash Jain, aged 69 years, is an Independent Director. He holds a
bachelor’s degree in Commerce from Rajasthan University and a bachelor’s degree
in Law from Agra University. He is a fellow member of the Institute of Chartered
Accountants of India. He is former Chairman and Managing Director of NTPC
Limited. He was also the Chairman of the Standing Conference of Public Enterprises(SCOPE) for the period 2003-05. He has been a past member of the Standing
Technical Advisory Committee of the Reserve Bank of India, Audit Advisory Board of
the Comptroller & Auditor General of India. He has headed the CII’s ‘National
Committee on Energy’. Presently, he is also an Independent Director on the boards
of IL&FS Energy Development Company Limited, Adani Power Limited and PCI
Limited. He is also a Member on the Advisory Board of Axis Infrastructure Fund.
Mr Shanti Prashad Jain, Independent Director
Mr Shanti Prasad Jain, aged 75 years, is an Independent Director. He is a fellow
member of the Institute of Chartered Accountants of India and has more than fourdecades of experience as a Chartered Accountant and Direct Tax Consultant. Mr Jain
Senior Partner at Shanti Prashad & Co., Chartered Accountants, New Delhi.
Dr S Rama Iyer, Independent Director
Dr S Rama Iyer aged 75 years, is an Independent Director. He is a Chemical Engineer
from Jadhavpur University and received a master’s degree and his PhD from Indian
Institute of Technology, Mumbai. He has also participated in the Senior Executive
Program of London Business School, United Kingdom. He has over five decades of
experience in Design Engineering, Project and Enterprise management in the
Chemicals, Petrochemicals and Oil & Gas industries as a member of the IndianInstitute of Chemical Engineers. He received the ‘Distinguished Alumnus Award’
from Indian Institute of Technology, Mumbai in 1996. He has been awarded the
‘Achiever of the Year Award’ by the Chemtech Foundation in the year 2003 and the
‘Business Leader of the Year Award’ by the Chemtech Foundation in the year 2005.
Ms Bindu Saxena, Independent Director
Ms Bindu Saxena aged 56 years, is an Independent Director. She is an Advocate and
a Partner at the law firm, Swarup & Company, Advocates, New Delhi. She has
completed her bachelor’s in Commerce and in Law from Lucknow University. She
has over 25 years of experience as Corporate Attorney, with experience ofcommercial transactions and projects in India and overseas.
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Operating metrics
INR m FY13 FY14 FY15 FY16E FY17E
Closing order book (MW) 370 1,178 1,384 1,622
Y-o-Y growth 218.4% 17.5% 17.2%
Order inflow (MW) 198 630 1,162 1,031 1,188
Y-o-Y growth 218.2% 84.4% -11.3% 15.2%Execution (MW) 198 330 578 825 950
Y-o-Y growth 66.7% 75.2% 42.7% 15.2%
Realizations (INR M/MW)
WTG 48 42 43 45 48
OMS 7 12 8 11 12
Cumulative Installed (MW) 318 468 742 1,516 2,428
Revenues 10,589 15,668 26,940 46,098 56,352
WTG 9,485 13,730 24,772 37,130 45,125Sale of services 1,010 1,756 2,093 8,883 11,133
other operating income 94 182 75 85 94
Revenues, % YoY 48.0% 71.9% 71.1% 22.2%
WTG 44.8% 80.4% 49.9% 21.5%
Sale of services 73.8% 19.2% 324.3% 25.3%
Other operating income 92.8% -58.8% 13.3% 10.0%
EBIDTA % 18.6% 11.2% 17.0% 18.8% 20.1%
Net Debt (INR m) 2,743 4,469 2,079 4,058 (1,709)
Core NWC (Days) 148 161 196 165 148
Customer Advances 3 3 0 0 0
Reported NWC (Days) 145 158 196 165 148
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Financials and valuations
Income Statement (INR Million)
Y/E March 2013 2014 2015 2016E 2017E
Total Revenues 10,589 15,668 27,099 46,098 56,352
Change (%) 48.0 73.0 70.1 22.2
Raw Materials 7,731 12,131 20,347 33,651 40,573
Staff Cost 250 384 549 791 1,044
Other Expenses 644 1,407 1,629 2,996 3,381
EBITDA 1,965 1,745 4,574 8,659 11,354
% of Total Revenues 18.6 11.1 16.9 18.8 20.1
Other Income 48 91 143 157 173
Depreciation 89 116 204 280 350
Interest 388 460 623 575 613
Exceptional Items - 15 0 - -
PBT 1,536 1,245 3,891 7,962 10,564
Tax 33 - 45 927 1,911 2,535
Rate (%) 2.1 -3.6 23.8 24.0 24.0
Adjusted PAT 1,503 1,290 2,964 6,051 8,029
Reported PAT 1,503 1,290 2,964 6,051 8,029
Change (%) (14.2) 129.9 104.1 32.7
Adj. Consolidated PAT 1,503 1,322 2,964 6,051 8,029
Change (%) (12.0) 124.2 104.1 32.7
Balance Sheet (INR Million)
Y/E March 2013 2014 2015 2016E 2017E
Share Capital 400 2000 2219 2219 2219
Reserves 2,555 2,278 12,151 18,078 26,107
Net Worth 2,955 4,278 14,370 20,297 28,326
Minority Interest - - - - -
Loans 3,769 5,582 9,200 5,750 6,500
Deferred Tax Liability 195 151 209 209 209
Capital Employed 6,919 10,011 23,779 26,257 35,035
Gross Fixed Assets 1,772 2,040 2,294 4,044 4,544
Less: Depreciation 206 317 423 608 816
Net Fixed Assets 1,566 1,722 1,872 3,437 3,728
Capital WIP 41 255 202 300 300
Investments 0.02 450.02 0.50 - -
Goodwill - 16 0 - -
Curr. Assets 7,895 12,354 28,667 34,301 46,154
Inventory 795 2,707 1,265 1,894 2,316Debtors 5,002 7,096 13,210 18,944 21,614
Cash & Bank Balance 15 73 7,120 1,692 8,209
Loans & Advances 1,964 2,030 6,720 11,367 13,586
Other Current Assets 119 449 352 404 429
Current Liab. & Prov. 2,582 4,788 6,962 11,781 15,147
Creditors 2,278 4,217 5,662 10,104 13,123
Other Liabilities 304 571 1,300 1,677 2,024
Net Current Assets 5,313 7,567 21,704 22,520 31,007
Application of Funds 6,919 10,011 23,779 26,257 35,035
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Financials and valuations
Ratios
Y/E March 2013 2014 2015 2016E 2017E
Basic (INR)
Adj EPS 37.6 6.6 13.4 27.3 36.2
Cash EPS 39.8 7.2 14.3 28.5 37.8
Book Value 73.9 21.4 64.8 91.5 127.6
Valuation (x)
P/E 11.3 64.2 31.8 15.6 11.7
EV/EBITDA 10.6 51.3 21.1 11.4 8.2
EV/Sales 2.0 5.8 3.6 2.1 1.6
Price/Book Value 5.7 19.9 6.6 4.6 3.3
Profitability Ratios (%)
RoE 50.9 30.9 20.6 29.8 28.3
RoCE 28.6 17.6 19.2 32.8 32.1
Turnover Ratios
Debtors (Days) 172 165 178 150 140
Inventory (Days) 27 63 17 15 15
Creditors. (Days) 79 98 76 80 85
Asset Turnover (x) 1.5 1.6 1.1 1.8 1.6
Leverage Ratio
Debt/Equity (x) 1.3 1.3 0.6 0.3 0.2
Cash Flow Statement (INR Million)
Y/E March 2013 2014 2015 2016E 2017E
PBT before EO Items 1,536 1,293 3,891 7,962 10,564
Add : Depreciation 89 116 204 280 350
Interest 314 460 623 575 613
Less : Direct Taxes Paid 287 334 927 1,911 2,535
(Inc)/Dec in WC (2,862) (2,389) (7,091) (6,244) (1,970)
CF from Operations (1,210) (854) - 3,300 662 7,021
EO Income - 15 0 - -
CF from Oper. Incl. EO Items (1,210) (870) (3,300) 662 7,021
(Inc)/Dec in FA (1,358) (498) (186) (1,848) (500)
Investment in liquid assets (0) 64 450 1 -
CF from Investments (1,358) (434) 264 (1,847) (500)
(Inc)/Dec in Debt 2,565 1,789 10,635 (3,450) 750
Less : Interest Paid 375 460 623 575 613
Dividend Paid 0 0 - - -
CF from Fin. Activity 2,193 1,361 10,084 (4,243) (5)
Inc/Dec of Cash (375) 58 7,047 (5,428) 6,517
Add: Beginning Balance 390 15 73 7,120 1,692
Closing Balance 15 73 7,120 1,692 8,208
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N O T E S
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