Inox India IPO Financial Analysis

About Inox India Limited

• Industrial Gas: This division creates, produces, & installs cryogenic systems & tanks for the distribution, storage, & transit of industrial gases, such as oxygen & green hydrogen
• LNG: This division designs, builds, supplies, & installs standard & engineered LNG distribution, storage, & transportation equipment in addition to small-scale LNG infrastructure solutions for automotive, marine, & industrial applications
• Cryo Scientific: With an emphasis on technology-intensive applications, this division provides equipment & complete solutions for scientific & industrial research in the area of cryogenic distribution. (Source: CG, RHP)

What’s the meaning of Cryogenic Equipment?

Cryogenic equipment produces or is used in the production of very low temperature materials or processes. Cryogenics, the study of very low temperatures, involves temperatures that are colder than those that can be attained with conventional refrigeration equipment

Financial Summary

Analysis

1. The steady increase in assets and net worth over the years is a positive sign as it indicates the company’s growth
2. The drop in revenues and PAT by 30-Sep-23 but 1 more quarter remains
3. Overall, the financial health of the company seems good

Let’s Analyse Other Important items

Assets

• Non-current assets: There is a steady increase in non-current assets over the years, which is a good sign as it indicates the company’s growth and long-term investment
• Current Assets: There is a significant increase in current assets over the years, especially in inventories and investments, which could indicate good liquidity position of the company

Equity and Liabilities

• Equity: The equity of the company has been increasing steadily over the years, which is a positive sign as it indicates the company’s ability to generate shareholder value
• Non-current liabilities: Non-current liabilities have remained relatively stable, which is good as it indicates the company is not overly reliant on long-term debt
• Current Liabilities: There is a significant increase in current liabilities, especially in other current liabilities. This could be a concern as it might indicate the company has a large amount of short-term debt

Overall, the financial health of the company seems good with increasing assets and equity. However, the increase in current liabilities should be monitored closely

Cash Flow Summary

Analysis

• Cash Flow from Operation: This is the cash generated from the company’s core business operations. It has decreased from FY21 to FY22, but increased again in FY23. This fluctuation could be due to changes in the company’s revenues or operating expenses
• Cash Flow from Financing: This is the cash used for financing activities like paying off debt or paying dividends. The negative values indicate cash outflows. The company has been reducing its cash outflows from financing activities over the years, which could be a good sign as it might indicate the company is reducing its debt or other financial obligations
• Cash Flow from Investing: This is the cash used for investing activities like purchasing assets. The negative values indicate cash outflows. There is a significant increase in cash outflows from investing activities in FY23, which could indicate the company is investing more in its growth

Overall, the company seems to be managing its cash flows well by generating cash from operations, reducing cash outflows from financing, and investing in its growth

Why Should I Invest in the INOX India IPO?

1. Market Leadership and Global Opportunities

• The company is a leading supplier of cryogenic equipment in India and has a strong presence in the global market
• With the global cryogenic equipment market projected to grow significantly, the company is well-positioned to capitalize on these opportunities
• The shift towards cleaner fuels like LNG and hydrogen will drive the demand for cryogenic equipment, benefiting the company.

2. Comprehensive Product Range

• The company’s range of cryogenic equipment spans the entire cryogenic value chain, providing an added advantage as these industries require specialized solutions
• The company’s long-standing presence in the industry, customized solutions, and established brand have enabled it to take a leading market position

3. Strong Focus on Product Development and Engineering

• The company’s focus on developing new technologies, engineering new products, and improving manufacturing processes gives it a competitive edge
• The company has developed and added new products over the past few years, demonstrating its ability to innovate and meet customer needs
• In conclusion, the company’s market leadership, comprehensive product range, and strong focus on product development and engineering make it a potentially good investment

SWOT Analysis

1.    Strengths:

• Leading Indian supplier and exporter of cryogenic equipment and solutions
• In-house engineering team for new product and solution development
• Marquee client base globally across various industry sectors

2.    Weaknesses:

• Vulnerability to fluctuations in steel prices, a significant component of raw material costs
• Heavy reliance on exports (approximately 46% of revenue in FY23 and around 62% of revenue in H1 FY24), making it susceptible to a potential global economic slowdown

3.    Opportunities:

• Continued growth in the demand for cryogenic equipment and solutions globally
• Potential for diversification into emerging markets or industries with growing demand for cryogenic products

4.    Threats:

• Intense competition in the cryogenic equipment and solutions market
• Economic downturns affecting customer spending on capital and maintenance expenditures

Key Performance Indicators (KPIs)

Trend over Years

Analysis

• The ROCE has shown an increasing trend over the years, indicating that the company is efficiently utilizing its capital to generate returns. The notable rise in 2023 suggests improved capital efficiency
• The ROE has also demonstrated a positive trend, showcasing the company's ability to generate profits from shareholders' equity. The increase in ROE from 2022 to 2023 indicates enhanced profitability relative to shareholders' investments

Comparison with listed industry peers 

In the domestic market, IIL has no identified competitors. Based on their product profiles, CIMC Enric Holdings Ltd. and Chart Industries Inc. are the two companies that are closest to IIL among peers in the global market. In contrast to these competitors, IIL is far more profitable, but in the higher price range, the company is also asking for a premium valuation, with a P/E multiple of 34.7 compared to its TTM EPS of Rs 19.0