One of the renewable energy giants, ACME Solar Holdings Limited, is set to launch its IPO today. The highly anticipated IPO aims to raise Rs.2900 crore from investors. But is the IPO worth considering? Let’s dig into the details of the IPO and the company to determine whether it fits into your investment plans.
Acme Solar Holdings Limited Details
| Offer Price | Rs.275 to Rs.289 per share |
| Face Value | Rs.2 per share |
| Opening Date | 6th November 2024 |
| Closing Date | 8th November 2024 |
| Total Issue Size (in Shares) | 10,03,46,021 |
| Total Issue Size (in Rs.) | Rs.2900 crore |
| Issue Type | Book Built Issue |
| Lot Size | 51 Shares |
| IPO Listing at | BSE, NSE |
The Acme Solar Holdings IPO includes a fresh issue of 8.29 crore shares, raising Rs.2,395 crore, and an offer for sale of 1.75 crore shares, totaling Rs.505 crore. Altogether, the IPO is sized at Rs.2,900 crore.
Kfin Technologies Ltd. has been appointed the issue’s registrar. Meanwhile, Nuvama Wealth Management Ltd., ICICI Securities Ltd., JM Financial Ltd., Kotak Mahindra Capital Company Ltd., and Motilal Oswal Investment Advisors Ltd. are the book-running lead managers.
Allocation of Shares
The ACME Solar Holdings IPO consists of 10,03,46,021 shares. Of these, 3 crore shares (29.9%) are reserved for Qualified Institutional Buyers (QIB), 1.5 crore (14.95%) for Non-Institutional Investors (NII), 1 crore (9.97%) for Retail Individual Investors (RII), 3,46,021 shares (0.34%) for employees, and 4.5 crore (44.84%) for Anchor investors.
On 5th November 2024, a day before the IPO launch, ACME Solar raised Rs.1,300.5 crore from anchor investors. Out of the 4.5 crore shares allocated to anchor investors, 1.5 crore were distributed to eight domestic mutual funds through 17 schemes.
The company has capped the maximum investment for retailers at 663 shares and 3417 shares for smaller HNIs (High-Net-Worth Investors who invest between Rs.2 lakh and Rs.10 lakh in any IPO). For the bigger HNIs (HNIs who invest more than Rs.10 lakh in an IPO), the minimum investment required is 3468 shares.
| Qualified Institutional Buyers (QIBs) | Not less than 75% of the Net Issue |
| Non-Institutional Investors (HNIs) | Not more than 15.00% of the Net Issue |
| Retail Investors | Not more than 10% of the Net Issue |
| Anchor Investors | 60% of the QIB portion |
| Eligible Employees | 10 crore shares with a discount of Rs.27 per share |
Source: SEBI
Objectives of the IPO
According to its red herring prospectus, Acme Solar plans to use the IPO proceeds primarily to reduce debt amounting to Rs.1,795 crore owed by its subsidiaries, either in whole or in part.
The remaining funds will be used for general corporate purposes, such as funding growth opportunities, business development, ongoing needs, or contingencies. The Offer for Sale proceeds will also go to the Promoter Selling Shareholder, ACME Cleantech Solutions Private Limited.
Grey Market Premium (GMP)
As of November 5, 2024, ACME Solar shares were trading at a 9.8% premium in the grey market over the upper price band. By November 6, the grey market premium (GMP) for Acme Solar Holdings’ IPO stood at Rs.10, reflecting a premium of approximately 3.46% over the IPO price of Rs.289.
This suggests the estimated listing price could be around Rs.299 per share. Looking at the past 13 sessions, the GMP has shown a downward trend, with the lowest recorded at Rs.0 and the highest reaching Rs.30.
Source: Livemint
Company Overview
ACME Solar Holdings is one of India’s largest renewable energy independent power producers (IPP) and ranks among the top 10 in operational capacity as of June 2024. Established in 2015, the company focuses on renewable energy and has a portfolio that includes solar, wind, hybrid, and firm dispatchable renewable energy (FDRE) projects.
ACME aims to provide sustainable green energy at affordable rates while managing resourceful projects. In October 2024, ACME Solar Holdings signed a Power Purchase Agreement (PPA) with the Solar Energy Corporation of India (SECI) for a 150 MW hybrid project. This project will combine solar power with Energy Storage Solutions (ESS).
The company has become a significant player in India’s renewable energy sector, successfully commissioning 3,668 MWp of solar power across 12 states. ACME’s solar power projects cover various services, including project development, financing, construction, and operation.
Financial Highlights
A] Revenue
For FY2024, the company’s revenue was Rs.1466.2 crore, around 6% more than the FY2023 revenue of Rs.1361.3. However, the revenue trend has been declining since the FY2021 revenue figure of Rs.1910.2 crore and the FY2022 figure of Rs.1892.2 crore.
One reason for such fluctuations is capacity divestment. In FY24, ACME Solar sold 369 MW of capacity to financial investors at approximately Rs.3.8 cr to Rs.4.4 cr per MW. The company used the proceeds to grow its business.
B] Net Profit:
The company’s net profit trend has improved over the past three years. As of FY2024, the company earned Rs.698.2 crore as net profit after incurring a loss in FY2023 (Rs.3.1 crore).
SWOT Analysis:
| STRENGTHS | WEAKNESSES |
| Strong Market Position: ACME Solar is a well-established player in the Indian renewable energy sector, ranking among the top 10 in operational capacity. Diversified Portfolio: The company has a diversified portfolio of solar, wind, and hybrid projects, reducing its reliance on a single technology. Financial Performance: The company showed strong financial performance in FY2024, recovering from the previous year’s loss. Focus on Innovation: ACME Solar is committed to innovation and is actively exploring new technologies, such as energy storage solutions. | Debt Burden: The company has a debt burden, which could impact its financial performance and ability to invest in future growth. Regulatory Risks: The renewable energy sector is subject to various regulatory risks, which could impact the company’s operations and profitability. Competition: The renewable energy sector is highly competitive, with several large players vying for market share. |
| OPPORTUNITIES | THREATS |
| Growing Renewable Energy Demand: As of August 2024, India’s installed renewable energy capacity has reached approximately 200 GW. The increasing demand for clean and sustainable energy, driven by climate change concerns and government policies, presents significant growth opportunities for ACME Solar. Emerging Technologies: Technological advancements like energy storage, solar photovoltaic (PV) modules, and wind turbines offer innovation and cost-reduction opportunities. | Intense Competition: The renewable energy sector is highly competitive, with numerous players vying for market share. Financing Challenges: Securing adequate financing for large-scale renewable energy projects can be challenging, especially in a volatile economic environment. Grid Integration Issues: Integrating large-scale renewable energy projects into the existing grid can pose technical and regulatory challenges. |
Conclusion
A global transition to green and clean energy has supported the growth of companies like ACME Solar, which offers a range of power generation services and products. In FY23, its profits declined due to amortization costs and the sale of certain projects. However, FY24 saw a sharp profit boost from higher income and exceptional items.
While profits may not be the only reason you decide to invest, they can be one factor to consider. Nevertheless, consider the information mentioned and more in-depth research before giving an IPO a chance to be part of your portfolio.
Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.
