ACME Solar IPO opens: Should you invest? Check GMP, brokerage views, & more

The public issue of ACME Solar Holdings is a book-built issue of Rs 2,900 crore, consisting of an offer for sale of 17,474,049 shares, and a fresh issue of 82,871,973 shares

ACME Solar Holdings IPO: The initial public offering (IPO) of renewable energy player ACME Solar Holdings opens for public subscription today. The company announced that it has already raised Rs 91,300.50 crore from anchor investors, with bidding concluding on Tuesday, November 5, 2024.

 

The public issue of ACME Solar Holdings is a book-built issue of Rs 2,900 crore, consisting of an offer for sale of 17,474,049 shares (valued at Rs 505 crore), and a fresh issue of 82,871,973 shares (valued at Rs 2,395 crore). The ACME Solar Holdings IPO is available at a price band of Rs 275-289, with a lot size of 51 shares. Accordingly, investors can bid for a minimum of 51 shares and in multiples thereof.

 

Meanwhile the unlisted shares of ACME Solar Holdings were trading at a premium in the grey market ahead of the launch of its public offering. Sources tracking grey market activities revealed that ACME Solar Holdings shares were commanding a premium of Rs 10, translating into a GMP of 3.46 per cent against the upper price band of Rs 289.

 

ACME Solar Holdings intends to utilise Rs 1,500 crore from the net proceeds towards funding the repayment or prepayment, in full or in part, of certain outstanding borrowings availed by its subsidiaries. The remaining proceeds will be used for general corporate purposes, which may include funding growth opportunities, business development initiatives, and contingencies. The proceeds from the offer for sale will go to the promoter selling shareholder, ACME Cleantech Solutions.

 

KFin Technologies is the registrar for the ACME Solar Holdings IPO. Nuvama Wealth Management, ICICI Securities, JM Financial, Kotak Mahindra Capital Company, and Motilal Oswal Investment Advisors are the book-running lead managers for the public issue.

 

Should you subscribe to ACME Solar Holdings IPO?

 

SBI Securities - Subscribe for long-term  

Analysts at SBI Securities recommend that investors subscribe to the ACME Solar Holdings IPO at the cut-off price for the long term. According to the analysts, at the upper price band of Rs 289, ACME Solar is valued at FY24 EV/EBITDA of 20.2x on post-issue capital. The current operational capacity of ACME is 1,340 MW, and total capacity (including contracted and awarded projects) is 6,320 MW. The company’s revenue has been stagnant over the last three years, with losses after adjusting for exceptional gains during the same period. However, analysts believe that growth potential in sales/EBITDA is healthy as expanded capacity gets commercialised over the next 2-3 years. "On a replacement cost basis, the company commands an EV/MW of Rs 3.5 crore, which is attractive compared to its peers," said analysts.

 

BP Equities - Subscribe for medium to long-term  

BP Equities, in its research note, has recommended subscribing to the IPO with a medium to long-term perspective. The brokerage highlighted that the company generates revenue by selling electricity to various off-takers, including central and state government-backed entities. Renewable energy installations in India have increased to approximately 200 GW, with renewable energy generation, including large hydro, now comprising about 44 percent of the country's total installed capacity. ACME has an extensive portfolio across various renewable energy technologies and is constantly expanding.

 

"Financially, ACME showed remarkable growth, with Profit After Tax (PAT) rising from Rs 62 crore in FY22 to Rs 697.8 crore in FY24, and Return on Equity (ROE) reaching 38.83 per cent in FY24. The issue is priced at a P/E ratio of 23.03x on the upper price band based on FY24 earnings, relatively lower than its peers. Therefore, we recommend a Subscribe rating with a medium to long-term investment perspective for this issue," BP Equities said in its report.

 

Swastika Investmart - Subscribe for long term  

Swastika Investmart, in a research note, has recommended investors subscribe to the ACME Solar Holdings IPO for the long term, cautioning those prepared for potential listing volatility. After a dip in profitability in FY23, the company recently demonstrated exceptional growth with strong margins. According to Swastika Investmart, the debt-to-equity ratio remains significantly high, though IPO valuation appears reasonable.

 

Bajaj Broking - Subscribe for long term  

Analysts at Bajaj Broking recommend subscribing to the IPO for a long-term perspective. "When annualising FY25 earnings to the post-IPO fully diluted equity base, the asking price results in a P/E of 21.11x, while based on FY24 earnings, the P/E stands at 25.06x. FY24 appears to be an exceptional year with significantly boosted profits, but the company has shown inconsistent top and bottom lines over the reported periods," said analysts. Its debt-equity ratio of 3.89 as of June 30, 2024, is notably high and raises concerns. Based on its financial metrics, the issue seems aggressively priced, they added.

 

About ACME Solar Holdings  

ACME Solar Holdings was incorporated in June 2015. The company produces electricity from wind and solar energy in India. It develops, constructs, owns, operates, and maintains large-scale renewable energy projects. The company generates revenue by selling electricity to central and state governments and other customers. As of March 31, 2024, its operational capacity was 1,320 MW in solar power projects.

 

ACME Solar Holdings' revenue from operations for FY24 rose to Rs 1,919.25 crore from Rs 1,294.90 crore in FY23 and Rs 1,487.90 crore in FY22. The company's total expenses for FY24 fell to Rs 1,305.48 crore, down from Rs 1,416.21