Premier Energies Limited is coming up with its IPO fresh issue of Rs. 1,291.40 crores and offer for sale worth Rs. 1,539 crores totalling Rs. 2,830.40 crores, which will open on 27^th August 2024.

The issue will close on 29^th August 2024 and be listed on the exchange on 3rd September 2024. In this article, we will look at Premier Energies Limited IPO Review and analyze its strengths and weaknesses. Keep reading to learn about the company.

About Premier Energies Limited

The company was incorporated in 1995. Premier Energies is into integrated solar cell and solar module manufacturer with experience of 29 years in the solar industry. The company makes solar cells, particularly bifacial monocrystalline PERC cells, and solar modules by using different technologies. They also sell custom solar products, execute EPC projects, provide O&M (Operations and Maintenance) services, and independently produce solar power.

They have five manufacturing facilities in Hyderabad, India. These facilities have a total annual capacity of 2 GW for solar cells and 4.13 GW for solar modules. Premier Energies serves a diverse customer base including independent power producers, OEMs, and off-grid operators in India and overseas. Some of their prominent clients include NTPC, Tata Power and others.

Premier Energies generates revenue primarily from selling manufactured solar cells and modules. They earn income from EPC contracts, traded goods, and power supply. The company has grown rapidly, with its revenue increasing at a CAGR of 105.72% from fiscal year 2022 to 2024. 

The order book as on 31st July 2024 stood at Rs. 5,926.56 crore out of which Rs. 1,609.11 crore in non-DCR solar modules, Rs. 2,214.06 crore in DCR solar modules, Rs. 1,891.18 crore in solar cells and the remaining Rs. 212.27 crore in EPC projects.

About the Industry

India’s power generation capacity reached 442 GW in FY24. The government plans to add 180 GW by FY28, with solar contributing 65% of this growth. Solar capacity is expected to increase from 82 GW to 198 GW, raising its share in the energy mix from 19% to 32%.

The government has introduced several schemes to boost solar adoption. The PM Surya Ghar Muft Bijli Yojana aims to provide rooftop solar to 10 million households. The PM-KUSUM scheme targets 34.8 GW of solar capacity for the agriculture sector. These initiatives will drive demand for domestic solar products.

India’s solar module manufacturing capacity has grown rapidly, reaching 72 GW in FY24. The government expects this to increase to 150 GW by FY28. Policies like Production Linked Incentives, Domestic Content Requirements, and import duties are supporting local manufacturers. These measures will reduce import dependency and boost exports in the coming years.

Financial of Premier Energies Limited

Premier Energies reported revenue from operations of Rs. 3,143.79 crores in FY24 compared to Rs. 1,428.53 crores in FY23. The company had a turnaround in Net profits in FY24 which was Rs. 231.36 crore. This was a significant improvement from a loss of Rs. 13.33 crore in FY23. There was an improvement in material cost, stock purchases, employee cost, other expenses and an increase in revenue from operations barring the rise in Interest cost which has contributed to profits growth.

The earning per share in FY24 was Rs. 6.93 per share which was an increase from the previous year’s Rs. -0.38 per share. There was a significant increase in EPS which has increased value for its shareholders.

Premier Energies in the recent June Quarter of FY25 posted Rs. 1,657.36 crore (171.24% YoY increase) and net profit of Rs. 198.16 crore (532.51% YoY increase). This is an exceptional leap in results considering a one quarter result outperforming 2023 fiscal year’s performance.  

Ratio Performance & Segments of Premier Energies Limited 

The RoE stood at 43.73% in FY24. As the company was not profitable in FY22 and FY23 the RoE stood negative. Based on their business operations looking at RoCE makes it relevant to understand the efficiency, and in FY24, the ratio was at 25.65% which was an improvement from 5.94% in FY23 and 3.63% in FY22.

As the solar cell business is capital intensive, Premier’s total debt to equity is around 2.18 in FY24 which is an increase from 1.86 in FY23. The company has maintained debt more than 1 time of equity value from FY22.

Premier Energies recognises its revenue from operations under Solar Energy. They make 86.80% from Manufactured goods, 8.21% from sale of goods traded, 0.12% from power supply, 4.73% from contracts and remaining 0.14% from other operating revenue in FY24. They derive around 86% within India and remaining 14% from outside India in FY24.

Key Players 

Premier Energies’s listed peer is Websol Energy System Limited. Compared to its peer, the debt to equity is around 2.18 compared to its peer’s 1.70 in FY24. Premier and Websol have a debt of more than 1 time of their equity. 

As Premier and Websol is a capital-intensive business, the higher ratio favours well with its operations. However, the decrease in the ratio is better as the growth will stabilise in the longer run and here Websol has better debt to equity ratio compared to Premier in this case. 

The EBITDA margin of Premier Energies is around 15.93% in FY24, compared to Websol’s -24.54% in FY24. Premier Energies margins are way better than Websol. 

Premier Energies return on equity is around 43.73%, which is higher compared to Websol’s -88.89% in FY24. In RoCE, Premier has outperformed Websol.

In conclusion, Premier overall has outperformed Websol in majority of the parameters and fare way better. Even in revenue size, premier is around 12 times larger than Websol. These parameters shows its performance in the industry.

Strengths of Premier Energies Limited

1. Market Presence: The company is the second largest integrated solar cell and module manufacturer in India. It has 2 GW annual capacity for solar cells and 4.13 GW for modules. This large scale allows it to be competitive in the market.
2. Quality & Brand Recognition: The company has a long track record in solar module manufacturing, starting in 1999. Their modules have won awards for reliability. This experience helps to build brand recognition and establish value with customers over time.
3. Manufacturing Experience: The company has expertise in solar cell production, which involves complex technical processes. They have transitioned from older to newer cell technologies. This technical knowledge gives it an advantage over newer market entrants.
4. Diverse customer base: The company has a diverse customer base in India and overseas. Its domestic customers are in 23 states/territories. It has a robust order book of over 5,000 crore rupees. This diverse base provides revenue stability.
5. Management Experience: The company has an experienced management team led by promoters with 29 years of solar industry experience. The senior executives have experience in solar manufacturing and business administration. This leadership provides strategic guidance and industry knowledge.

Weaknesses of Premier Energies Limited

1. Key Customer Dependency: The company depends heavily on a small number of key customers. Losing even one major customer could hurt their business. The company’s Top 5 Customers contribute 43.41% and Top 10 contribute 67.03% of operating revenue. This high customer concentration makes them vulnerable. 
2. Manufacturing concentration: All their manufacturing facilities are in one state (Telangana). This geographic concentration exposes them to local risks and supply chain issues that could cause disruption in their operations.
3. Capacity Underutilisation: The company has 5 units and in Solar Cell the company had capacity utilisation of 80.76% and Solar cell had 60.29% in FY24. The underutilisation can increase the costs for the company affecting its margins. 
4. Cash Flow Issues: Premier experienced negative cash flows in fiscal year 2023 and part of 2024 mainly funded through borrowings. The cash flows issue could limit their ability to operate and grow the business as expected.
5. Narrow Product Range: The company relies entirely on two main products – solar cells and modules. This lack of product diversity makes them vulnerable to changes in demand or technology for these specific items.

GMP of Premier Energies Limited IPO

The shares of Premier Energies Ltd’s price in the grey market were trading at a 62.22% premium as of August 23^rd, 2024. The shares in Grey Market traded at Rs.730. This gives it a premium of Rs.280 per share over the cap price of Rs. 450.

Key Information on Premier Energies Limited IPO

Promoters: Surender Pal Singh Saluja and Chiranjeev Singh Saluja.

Book Running Lead Manager: Kotak Mahindra Capital Company Limited, J.P. Morgan India Private Limited, and ICICI Securities Limited.

Registrar to the Offer: KFin Technologies Limited.

The Objective of the IPO

1. Establishment of 4 GW Solar PV TOPCon Module and 4 GW Solar PV TOPCon Cell manufacturing facility in Hyderabad by investing in subsidiary – Premier Energies Global Environment Private Limited. (Rs. 3,358.32 crore).
2. General Corporate Purposes.

Conclusion

Premier Energies Limited has performed well in recent times. The company has been able to improve its operational efficiency and have a robust order book. However, the high borrowings during the slow growth period can hinder their margins as Interest costs have increased YoY.

The Industry is in the high growth stage and with government initiatives these companies can benefit from these opportunities. Premier Energies in the recent quarter has projected its growth and is poised to be a huge competitor to its peers.

So what do you make of this company? What is your view on Premier Energies? Let us know your views in the comments section below.

Written by Santhosh