What you must know about Australian Premium Solar IPO?

Australian Premium Solar (India) Ltd was incorporated in 2013 for the manufacture of monocrystalline and polycrystalline solar modules. In addition,  Australian Premium Solar (India) Ltd also provides engineering, procurement, and construction (EPC) services for residential, agricultural, and commercial applications. Broadly, the product mix of the company is classified into 2 types of solar panels: viz., Monocrystalline solar panels and Polycrystalline solar panels. The solar cells that are used in monocrystalline solar panels are more efficient and have a darker, uniform appearance due to their monocrystalline structure. This permits the busbars (copper-coated thin ribbons) to be placed more strategically without detracting too much from the appearance. On the other hand, the solar cells used in polycrystalline solar panels have a blue or speckled appearance due to their multi-crystalline structure. As a result, in this particular model, the busbars have to be positioned to accommodate the less uniform appearance of cells.

In addition, Australian Premium Solar (India) Ltd also provides installation services for solar panels and solar pumps for residential and industrial end users. In addition, it also provides installation services for solar pumps for agricultural end users. Til date, Australian Premium Solar (India) Ltd has provided more than 10,000 customers with the installation of solar panels. Out of these, more than 9,500 solar panels have been installed on the roofs of residential buildings and over 1,300 such solar panels have been installed by the company along with solar pumps for agriculture. Australian Premium Solar (India) Ltd has a manufacturing facility is located in Sabar kantha, in the state of Gujarat. The company has currently about 169 people on its employee roster.

Key terms of the Australian Premium Solar IPO

Here are some of the highlights of the Australian Premium Solar IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 11th January 2024 and closes for subscription on 15th January 2024; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a book built issue. The price band for the book built issue has been set in the range of ₹51 to ₹54 per share. The final price of the IPO will be decided by book building within this price band.
   
• The IPO of Australian Premium Solar (India) Ltd has only a fresh issue component and no offer for sale (OFS) portion. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.
   
• As part of the fresh issue portion of the IPO, Australian Premium Solar (India) Ltd will issue a total of 52,00,000 shares (52.00 lakh shares), which at the upper band of the book building band of ₹54 per share aggregates to fresh fund raising of ₹28.08 crore.
   
• Since there is no offer for sale (OFS) portion, the fresh issue size will also double up as the overall IPO size. Therefore, the overall IPO size will also comprise of the issue of 52,00,000 shares (52.00 lakh shares) which at the upper IPO band price of ₹54 per share will aggregate to overall IPO size of ₹28.08 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 2,60,000 shares. The appointment of the market maker is yet to be finalized. The market maker will provide two-way quotes to ensure liquidity on the counter and low basis costs, post listing.
   
• The company has been promoted by Chimanbhai Ranchhodbhai Patel, Savitaben Chimanbhai Patel, and Nikunjkumar Chimanlal Patel. The promoter holding in the company currently stands at 99.98%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 73.64%.
   
• The fresh issue funds will be used by the company for funding the capital expenditure and for meeting the working capital funding gaps of the company. Part of the monies raised will also go towards meeting the general corporate expenses of the company.
   
• Beeline Capital Advisors Private Ltd will be the lead manager to the issue, and Link Intime India Private Ltd will be the registrar to the issue. The market maker for the issue is yet to be officially announced.

IPO allocation and minimum lot size for investment

Australian Premium Solar (India) Ltd has already announced the market maker allocation at 2,60,000 shares as inventory for market making. The name of the market maker is also yet to be announced by the company. The net offer (net of market maker allocation) will be divided between the QIB investors, retail investors and the HNI / NII investors. The breakdown of the overall IPO of Australian Premium Solar (India) Ltd in terms of the allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 2,000 shares. Thus, retail investors can invest a minimum of ₹108,000 (2,000 x ₹54 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 4,000 shares and having a minimum lot value of ₹216,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Key dates to be aware of in the Australian Premium Solar IPO (SME)

The SME IPO of Australian Premium Solar (India) Ltd IPO opens on Thursday, 11th January 2024 and closes on Monday, 15th January 2024. The Australian Premium Solar (India) Ltd IPO bid date is from 11th January 2024 at 10.00 AM to 15th January 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 15th January 2024.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on January 17th 2024, will be visible to investors under the ISIN Code – (INE0P0001010).

Financial highlights of Australian Premium Solar (India) Ltd

The table below captures the key financials of Australian Premium Solar (India) Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years.

• The revenues have grown over the last 2 years, but the latest year growth is flat. Hence the CAGR growth over two years is still quite tepid. Also, the PAT margins have been just around the range of 3% over the last 3 years.
   
• While the company has reported tepid net margins, the ROE at over 23% and the ROA at over 8% are fairly attractive in terms of profitability generated on capital. However, the growth in the PAT margins would be the key to sustaining valuations for the company
   
• The asset turnover ratio or the asset sweating ratio is fairly impressive at above 2X, and it looks better if you combine it with the ROA, which is also attractive at over 8%.

The company has latest year EPS of ₹2.29 and weighted average EPS of ₹1.97 for the last 3 years. Either ways, the valuations look reasonable if you consider latest year EPS at 23.58 times P/E discounting. The discounting may be slightly unfavourable on average P/E but that does not matter. What matters is the intangibles that the company has. Apart from a high growth and high potential market, the company has also built up a scalable model and deep relationships with their clients. Investors can look at the IOP, but with a long term caveat.