Vikram Solar proposes to issue Rs.2,000 crore IPO

Even as the stock markets have been struggling with the uncertainty surrounding the LIC IPO, the slew of fresh companies filing for their IPOs continues.

The latest is Vikram Solar, a major Indian solar module manufacturer. It has already filed its draft red herring prospectus with SEBI for the proposed IPO. Typically, SEBI takes around 2-3 months to approve the IPO and then sends its observations to the issuer, which his tantamount to an approval. 

The total size of the IPO is expected to be around Rs.2000 crore. Out of this total IPO size, Rs.1,800 crore will be by way of an offer for sales by the promoters and the promoter group companies.

The balance Rs.200 crore will be shares offered by way of fresh issue of capital. The issue is going to be lead managed by JM Financial and by Kotak Mahindra Capital and issue would most likely hit the capital markets only after the LIC IPO is out of the way. 

Typically, the offer for sale is neither capital dilutive nor EPS dilutive. It also does not result in any fresh fund infusion into the company as it is purely change of ownership. However, it does bring the stock in popular trading range by improving the free float.

The fresh issue component of Rs.200 crore would be EPS dilutive and also capital dilutive. While fresh funds will come, the fresh issue component will also reduce promoter stake in the company.

Vikram Solar is already India's second-largest solar energy company by top line revenues, the largest being Adani Green Energy Ltd. Let is take a quick peak at the financials. For the FY21 fiscal year period ending May 2022.

For the financial year ended March 31, 2021, the company posted a 4% growth in revenues at Rs.1,577 crore. During the same period, its net profit jumped six-fold from Rs.6.04 crore in FY20 to Rs.37.14 crore in FY21.

The company aims to benefit substantially from the renewable energy thrust of the government of India. The company has existing up and running plants in West Bengal and Tamil Nadu with a total solar module manufacturing capacity of 2.5 gigawatts (GW).

With the government already pushing for higher levels of clear and renewable energy, the company sees a huge opportunity on getting aggressive in this side of the business.

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