Indosolar IPO, Rs 357 crore issue opens today

All recent listings have given average to handsome returns to investors and that has definitely raised hope for more IPOs to be in queue in coming few months. Although all eyes are set for mega IPO of Coal India that is opening on October 18th for subscription, but we may see nearly half a dozen issues entering before that. After two week's of dry spell, this week we have Indosolar Ltd.

Indosolar Ltd is one of the leading Indian manufacturers for solar photovoltaic (SPV) cells. Currently it has a capacity of 160 MWp with an average efficiency rating of 16+% peaking at 17.2%. Now it proposes to expand it's capacity to 260 MWp by the end of fiscal 2011.

The plant located in Greater Noida, Uttar Pradesh, India is a unique facility in a developing economy, and can accommodate a maximum of 4 productions lines.

The company is promoted by B K Gupta family who pioneered in India for Halogen lamps by their first venture Phoneix Lamps.

To part finance the ongoing expansion, the company proposed to mobilize Rs. 357 crore by a book building process offer of 12,31,03,448 equity share of Rs. 10 each within a price band of Rs. 29- 32.

The issue is opening for subscription on 13th September 2010 and closes on 15th Sept. 2010. The equity shares offered through this offer will be listed on BSE and NSE. Enam Securities Pvt. Ltd is the lead book runner and Link Intime India Pvt. Ltd. is the registrar to the issue.

According to CRISIL, which has graded the IPO, with a " IPO Grade 3" out of 5 ( indicating average fundamentals) , that the technology for manufacturing SPV cells is still evolving and, therefore, carries the risk of obsolescence for existing players including Indosolar. The company also has no prior experience in the SPV cells business and is expected to face competition from large and established players.

Further, the grading takes into consideration the fact that the growth of the solar industry would depend entirely on governmental support as the cost of power generation currently is very high and the solar industry would take several years to achieve grid parity. Post IPO as it will cross the capital threshold of Rs. 1000 crore, and thus will be entitled for a 250- crore capital subsidy under semi- conductor policy of the Government of India.

For the past three years, the company has posted loss and its NAV as on 30.09.2009 is Rs. 8.50 per share. Issue price looks high based on EPS of Rs. - 0.66 posted for the period ended 30.09.2009. Thus track record is not up to the mark However, the management is confident of breaking even in the current fiscal.

The company, currently has a order book of Rs. 1,012 crore from solar panel- and module- makers from 9 countries, expects the Jawaharlal Nehru National Solar Mission to boost domestically- manufactured solar cells demand from this year onwards. As per the scheme, the government expects to generate 20,000 MW of solar power by 2022 from the present under-10 MW.

To avail of the benefits under the mission, solar power firms are required to source solar cells from domestic manufacturers.