Indowind Energy RI review - (Avoid)

•    IEL is a south-centric renewable power generation company with a major focus on windmills.
•    It has marked inconsistency in its financial performance so far.
•    Super earnings for 3Qs of FY23 raise concerns over the sustainability.
•    It is operating in a highly competitive segment with many big players. 
•    There is no harm in ignoring this high-risk/low-yield bet. 

PREFACE:
IEL came with its first maiden IPO for Rs. 81.25 cr. with a price band of Rs. 55 - Rs. 65 in August 2007 and is now coming with an RI of Rs. 43.08 cr. at a fixed price of Rs. 12 per share. Higher paid-up equity capital post-RI raises concern over serving the same. 

ABOUT COMPANY:
Indowind Energy Ltd. (IEL) is a wind energy-based renewable power generation and distribution company focused on owning, operating, and maintaining windmills. It has been involved in the renewable energy industry concentrating on wind energy for over twenty-five years. IEL's windmills are located in the states of Tamil Nadu and Karnataka, which are one of the highest wind potentials in Indian states.

The company commenced its journey in the year 1995 with the setting up of the first windmill in the state of Tamil Nadu having a capacity of 225 KW. It has grown business by acquiring and operating brownfield windmills from third parties and also by developing greenfield projects. As of March 31, 2022, IEL's total capacity of wind energy-based renewable power generation is 49.645 MW with 123 windmills spread across the States of Tamil Nadu and Karnataka. Out of the total capacity of 49.645 MW, windmills constituting a capacity of 29.55 MW are located in the State of Tamil Nadu and 20.095 MW is located in the State of Karnataka.

The power generated from windmills is sold under the group captive scheme to corporates and State Electricity Boards ("SEBs") pursuant to Power Purchase Agreements ("PPAs"). In addition to the above, it is also in the business of providing operation and management services for windmills for third parties under turnkey projects. As of March 31, 2022, it had 66 employees on its payroll. 

ISSUE DETAILS:
The company is issuing up to 35896594 equity shares of Rs. 10 each at a fixed price of Rs. 12 per share by way of a rights issue (RI) to mobilize Rs. 43.08 cr. It is offering 2 shares for every 5 shares held by the eligible stakeholders as of the record date of January 13, 2023. The full amount is to be paid along with the application for the number of shares applied. The issue opens for subscription on January 27, 2023, and will close on February 10, 2023. Post allotment, shares will be listed on BSE and NSE. IEL is spending Rs. 1.08 cr. and adjusting Rs. 9.00 cr. against loan adjustments from the group companies. From the net proceeds, it will utilize Rs. 33.00 cr. for repayment of loans from Exim Bank.  

This RI is self-managed by the company and Bigshare Services Pvt. Ltd. is the registrar of the issue. 

Post-RI, IEL's current paid-up equity capital of Rs. 89.74 cr. will stand enhanced to Rs. 125.64 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 150.77 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, IEL has (on a consolidated basis) posted a total income/net profit of Rs. 21.33 cr. / Rs. 0.06 cr. (FY20), Rs. 20.67 cr. / Rs. 0.22 cr. (FY21), and Rs. 26.99 cr. / Rs. 0.13 cr. Thus it has marked inconsistency in its top and bottom lines. 

As per unaudited results filed with the exchange, for 3Qs of FY23, it earned a net profit of Rs. 5.67 cr. on a total income of Rs. 30.11 cr. This super performance raises eyebrows and the sustainability of such performance going forward is a major concern. 

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. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 532894 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 15.70 on January 12, 2023, and opened on an ex-right basis at Rs. 13.95 on January 13, 2023. Since then, it has marked a high/low of Rs. 16.50 / Rs. 13.35. It last closed at Rs. 13.95 as of January 23, 2023. For the last 52 weeks, it has marked a high/low of Rs. 25.00 / Rs. 10.96. The promoter's holding has declined a bit from 45.87% (June 22) to 44.76% (Dec. 22). The counter is well maintained above the RI price to lure investors.