Winsol Engg. NSE SME IPO review (Apply)

•    WEL is an integrated EPC company providing BoP solutions for Wind and Solar power generation companies.
•    It marked quantum jump in its bottom lines from FY23 onward with its prudent cost management plans.
•    Based on FY24 annualized earnings, the issue appears reasonably priced. 
•    It has approx. Rs.98+ cr. order book as of the filing of this offer document. 
•    Investors may park funds for the medium to long term rewards.

ABOUT COMPANY:
Winsol Engineers Ltd. (WEL) is an integrated engineering, procurement, construction and commissioning company providing Balance of Plant (BoP) Solutions for both Wind and Solar power generation companies. Its core services for BoP Solutions includes Foundation work, Substation Civil and Electrical work, Right of Way services, Cabling to substation and Grid, and Miscellaneous work. 

WEL's clients are in the renewable energy industry who prefer WEL for the BoP solutions due to its historic track record of timely completion of project, its expertise and extensive experience in the business and cost efficiency. In addition to WEL's core BoP Solutions, the company also provides Operation and Maintenance services for Plant handling and monitoring. It is ISO-9001-2015, ISO-14001-2015 & ISO-45001-2018 certified company demonstrating its execution capabilities in quality. The company has total team strength of more than 200 (Engineers and Technicians) for execution of various projects. It has been executing various projects on a Turnkey basis for various clients including Suzlon, Adani Green Energy, Powerica Limited and KP Energy Limited. 

As of the Date of this Red Herring Prospectus, the company has more than 41 Major Ongoing projects having total value of approximately Rs. 119.53 cr. out of which invoices of more than Rs. 21.15 cr. has been submitted as on March 31, 2024 resulting order book of Rs. 98.38 cr. which has been still unexecuted or for which invoice has not been submitted, based on management estimates, suggesting strong order book. According to the management, this situation has come for the first time in their business history and is indicative of prospects lying ahead. The company will have approx. 70% revenue generation from Wind Mills and the rest from Solar systems. As of December 31, 2023, it had 270 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 3115200 equity shares of Rs. 10 each to mobilize Rs. 23.36 cr. at the upper cap. It has announced a price band of Rs. 71 - Rs. 75 per share. The issue opens for subscription on May 06, 2024, and will close on May 09, 2024. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.01% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 15.00 cr. for working capital, and the rest for general corporate purposes.

The issue is solely lead managed by Beeline Capital Advisors Pvt. Ltd., and KFin Technologies Ltd. is the registrar of the issue. Beeline Group's Spread X Securities Pvt. Ltd. is the market maker for the company. 

The company has issued initial equity capital at par and issued further equity shares at a fixed price of Rs. 1000 per share in June 2019. It has also issued bonus shares in the ratio of 420 for 1 in December 2023. The average cost of acquisition of shares by the promoters is Rs. NIL, Rs. 0.96, and Rs. 4.85 per share.

Post-IPO, company's current paid-up equity capital of Rs. 8.42 cr. will stand enhanced to Rs. 11.54 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 86.51 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total revenue/net profit of Rs. 22.25 cr. / Rs. 0.49 cr. (FY21), Rs. 60.80 cr. / Rs. 1.09 cr. (FY22), and Rs. 65.45 cr. / Rs. 5.18 cr. (FY23). For 9M of FY24 ended on December 31, 2023, it earned a net profit of Rs. 6.77 cr. on a total revenue of Rs. 52.02 cr. The quantum jump in bottom lines for FY23 and 9M-FY24 is attributed to its change of servicing/materials offering that brought higher margins, which were enjoyed by the suppliers earlier. The management is confident of maintaining the trends of higher revenue and net earnings. 

For the last three fiscals, it has reported an average EPS of Rs. 2.68, and an average RONW of 43.61%. The issue is priced at a P/BV of 4.14 based on its NAV of Rs. 18.14 as of December 31, 2023, and at a P/BV of 2.24 based on its post-IPO NAV of Rs. 33.49 per share (at the upper cap).

If we attribute annualized FY24 super earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 9.58 and based on FY23 earnings, the P/E stands at 16.70. Thus the issue appears reasonably priced. 

For the reported periods, the company has posted PAT margins of 2.23% (FY21), 1.79% (FY22), 7.92% (FY23), 13.04% (9M-FY24), and RoCE margins of 11.71%, 16.14%, 46.19%, 44.18% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. 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 Konstelec Engg. as their listed peers. It is trading at a P/E of 30.0 (as of April 30, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 36th mandate from Beeline Capital in the last three fiscals (including the ongoing one), out of the last 10 listings, all got listed with premiums ranging from 5.88% to 200% on the date of listing.