Inox IPO subscribed 18 times

The overwhelming response bucks the recent trend of poor investor demand for Ortel and Adlabs' offers

The Rs 1,000-crore public issue of Inox Wind saw 18 times more demand than the shares on offer, bucking the recent trend of a tepid response to Initial Public Offers (IPOs) of equity.

The Gujarat Fluorochemicals-promoted wind energy solutions company's offering of 23.2 million shares got bids worth nearly Rs 14,000 crore. This was in contrast to the earlier two IPOs, of Adlabs Entertainment and Ortel Communications, which barely managed to go through.

The Inox offer saw all-round demand, with shares meant for institutional investors and the rich getting subscribed 35 times each. The retail category was subscribed only two times the amount on offer, despite the company offering an extra discount of Rs 15 a share to those investing up to Rs 2 lakh.

Axis Capital, DSP Merrill Lynch & Edelweiss Financial Services were the IPO's investment bankers.

The offer comprised Rs 700 crore of new issue and an offer for sale of Rs 300 crore by Gujarat Fluoro.

Most domestic brokerages — including Motilal Oswal, ICICI Direct and HDFC Securities — had advised their clients to subscribe.

“We expect Inox Wind’s WTG (wind turbine generator) sales to increase from 330 Mw in FY14 to 600 Mw in FY15 and 1-1.2 Gw (1,000 Mw is a Gw) in FY16. The O&M (operation and maintenance) business also provides interesting growth possibilities. Serious government intent to push renewable power is a key driver,” says a report by Motilal Oswal.

“Inox Wind is well positioned to grow at a very healthy rate over the next few years. The management has shown execution capabilities to deliver 16 per cent Ebitda (earnings before interest, taxes, depreciation and amortisation) margins and a 30 per cent return on equity in the first nine months of FY15. At the offer price, it is valued at 17 times earnings on an enterprise value to Ebitda basis,” says a note by KR Choksey.

Brokers said the shares were trading at an attractive premium in the grey market (legal but unofficial trading of a company's shares, usually before issue in an IPO), which also contributed to demand, especially from wealthy individuals.