Alpex Solar NSE SME IPO review (Apply)

•    ASL is a solar PV module manufacturer.
•    Though it marked growth in its top lines, the bottom line marked erratic inconsistency.
•    The company is expanding its capacity and adding new aluminum frame unit.
•    Based on is FY24 annualized super earnings, the issue is lucratively priced.
•    Investors may park funds for the medium to long term rewards.

ABOUT COMPANY:
Alpex Solar Ltd. (ASL) is a solar photovoltaic (PV) module manufacturer in North India. Its PV modules are manufactured using both monocrystalline and polycrystalline cell technologies. ASL's portfolio of solar energy products consists of bifacial, mono perc, Half-cut solar PV modules. It also provides integrated solar energy solutions, including engineering, procurement, construction (EPC) of AC/DC Solar Pumps in both Surface and Submersible categories.

The company manufactures and delivers solar panels in the B2B space and also serve as a contract manufacturer for several large companies, including Luminous, Jakson, and Tata Power. Its solar panels are delivered to companies, with a specific focus on EPC companies such as Solarworld Energy Solutions Pvt Ltd, BVG India Limited, Tata Power, Hild Energy Private Limited, and Shakti Pumps India Limited. These companies install ASL's solar panels at their clients' locations after securing orders. As for solar water pumps, it targets the B2C segment. 

ASL begin by applying for tenders in respective states, and if it succeeds in winning the tender, it proceeds to assess the installation site and subsequently install solar water pumps at the designated locations. It currently operates from one manufacturing facility in Greater Noida, situated at Plot Number I-25, 26, 27, Surajpur Industrial Area, Site - V, Kasna, Greater Noida, and has additional offices located in various cities, including New Delhi, Haryana, Chhatisgarh, Mumbai, Ludhiana, Nalagarh (Himachal Pradesh), Jaipur, and Tirupur (Tamil Nadu).

Its manufacturing unit is equipped with world-class PV manufacturing lines from worldwide suppliers. The fully automatic robotic plants currently have a manufacturing capacity of 450MW, with plans to increase it to 1GW. As of the date of RHP it had 196 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 6480000 equity shares of Rs. 10 each. It has announced a price band of Rs. 109 - Rs. 115 per share and mulls mobilizing Rs. 74.52 cr. at the upper cap. The issue opens for subscription on February 08, 2024, and will close on February 12, 2024. The minimum application to be made is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.48% of the post-IPO paid-up capital of the company. From the net proceeds of the fresh equity issue, it will utilize Rs. 19.56 cr. capex on upgrading and expansion of solar module manufacturing facility, Rs. 12.95 cr. for capex on new aluminum frame unit, Rs. 20.50 cr. for working capital and the rest for general corporate purposes. 

The issue is solely lead managed by Corporate Capitalventures Pvt.  Ltd., and Skyline Financial Services Pvt. Ltd. is the registrar of the issue. S S Corporate Securities Ltd. is the market maker for the company. 

After having issued initial equity capital at par, it issued further equity capital in the price range of Rs. 45 - Rs. 200 per share between March 2007 and January 2011. It has also given bonus shares in the ratio of 1 for 1 in February 2004, 4 for 1 in December 2010, and 2 for 1 in October 2023. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, Rs. 0.04, Rs. 0.27, Rs.  0.33, Rs. 0.56, Rs. 0.58, Rs. 1.43, and Rs. 11.08 per share

Post-IPO, company's current paid-up equity capital of Rs. 17.99 cr. will stand enhanced to Rs. 24.47 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 281.44 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 149.73 cr. / Rs. 3.16 cr. (FY21), Rs. 168.54 cr. / Rs. 0.20 cr. (FY22), and Rs. 195.92 cr. / Rs. 3.79 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earns a net profit of Rs. 7.60 cr. on a total income of Rs. 213.11 cr. Thus its top and bottom lines posted growth for the reported periods. Spectacular performance for first half of current fiscal raises eyebrows and concern over its sustainability.

For the last three fiscals, it has reported an average EPS of Rs. 1.38, and an average RONW of 6.15%. The issue is priced at a P/BV of 1.41 based on its NAV of Rs. 81.81 as of September 30, 2023, and at a P/BV of 2.28 based on its post-IPO NAV of Rs. 50.50 per share (at the upper cap).

If we attribute annualized FY24 super earnings to its post-IPO fully diluted paid-p capital, then the asking price is at a P/E of 3.70. Based on its FY23 earnings, the P/E stands at 7.43. Thus the issue appears lucratively priced. 

For the reported periods, the company has posted PAT margins of 2.13% (FY21), 0.12% (FY22), 1.94% (FY23), 3.57% (H1-FY24). 

DIVIDEND POLICY:
The company has not declared any dividends for any financial year. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Insolation Energy as their listed peers. They are trading at a P/E of 120 (as of February 02, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 11th mandate from Corporate Capital in the last three fiscals, out of the last 10 listings, 2 opened at discount and the rest with premiums ranging from 34.62% to 231.63% on the date of listing.