The Waaree Energies IPO Finally Moves Closer, Marks A Major Step for Manufacturers

Mumbai-based Waaree Energies, India’s largest solar module manufacturer, has filed a draft red herring prospectus (DRHP) with markets regulator Securities and Exchange Board of India (SEBI) to raise Rs 1,350 crore via an initial public offer (IPO). The issue will also have an offer for sale by promoters. The news comes even as enough indications had been made in the recent past about the firm’s plans to tap the capital markets for its expansion plans. In this space, we have repeatedly stressed on the need for better financing avenues for Indian manufacturers as one of the key challenges to compete with global players, notably Chinese competition.

The company has announced plans to use the proceeds from the IPO for a 2 GW per annum solar cell manufacturing facility and a 1 GW per annum solar PV module manufacturing facility in Chikhli, Gujarat. Around Rs 978.36 crore will be used for the solar cell manufacturing unit and Rs 184.23 crore will be used for PV module unit. The remaining proceeds will be used for general corporate purposes.

The issue will include fresh issuance of 4,007,500 equity shares of Rs 10 each by the existing shareholders and promoters. The offer for sale (OFS) would consist of sale of 13,15,000 shares by Founder and CMD Hitesh Doshi, Viren Chimanlal Doshi and Mahavir Thermoequip. 40,000 shares will be tendered by Samir Surendra Shah,  and up to 22,500 shares by Nilesh Shah.

Waaree has an aggregate installed capacity of 2 GW as of March 31, 2021 and is in the process of setting up another 3GW module facility at Chikhli Gujarat. It is expected to be operational by the end of FY22. Another 4 GW solar cell manufacturing capacity is expected to be operational by the end of fiscal 2023.

The move by Waaree Energies should be welcomed for the diversification it brings to the firms accessing the capital markets from the solar sector. Most listed firms in the renewable energy space so far had been predominantly developers or even EPC players, not manufacturers. Waaree’s plans, and possible success will definitely open the doors for many other firms, notably Vikram Solar.

The listing of manufacturers will also help bring about more transparency for buyers and other stakeholders alike, as quality news flow starts from these firms on their performance and challenges on a quarterly basis. With a high duty structure set to kick in from FY 2023 besides possibly one of the best business environment in terms of demand growth and long term visibility, it is clear that the time was never better for manufacturers to go public.

For Waaree, a listing will open up many new avenues, besides the added visibility of course. In a sector where smaller manufacturers will increasingly face touch choices in the coming future as larger players scale up, consolidation is bound to follow, and market valuation of top players like Waaree will set a clear benchmark for other deals too.