Inox India IPO: Should you Apply?

The Inox India IPO, set to open for subscription on December 14, 2023, has garnered significant attention from investors and analysts alike. With a strong presence in the cryogenic equipment market and a reputation for technological innovation, Inox India is poised to capitalize on global market growth. This blog will delve into the details of this IPO, the company’s strengths, and why analysts recommend subscribing for the long term.

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Understanding Inox India

Inox India Limited is a pioneering company known for its expertise in manufacturing cryogenic equipment. The company boasts a rich history and is well-regarded for its technological prowess. It operates in a niche sector that is gaining prominence due to the global push to reduce carbon emissions and embrace clean energy sources like liquefied natural gas (LNG) and hydrogen.

Key IPO Details

The Inox India IPO comprises an offer-for-sale of 2.21 crore shares by existing shareholders, with the company not receiving any proceeds from the IPO. The price band for the IPO has been set at Rs 627-660 per share, and the subscription period will conclude on December 18, 2023. Prominent shareholders, including Siddharth Jain, Pavan Kumar Jain, Nayantara Jain, and Ishita Jain, along with others, will be divesting their shares.

Also See: Upcoming IPO in India

Analyst Recommendations

Analysts from reputable brokerage firms, Anand Rathi and Stoxbox, have offered favorable views on the Inox India IPO. They recommend subscribing to the issue for the long term, citing several compelling reasons.

  1. Market Leadership and Strong Order Book: Inox India holds a dominant position in the Indian cryogenic equipment market. Its robust order book, diversified clientele spanning various sectors, and focus on exports bode well for its growth prospects.
  2. Technological Edge: The company’s in-house technology and a comprehensive LNG product range covering the entire value chain position it to capitalize on the global demand for cryogenic equipment.
  3. Financial Performance: Inox India has demonstrated a healthy financial performance in the past. It has reported impressive return on equity (RoE) and return on capital employed (RoCE), both exceeding 25 percent, instilling confidence in its ability to sustain business performance.
  4. Reduced Borrowings: The company is actively reducing its debt burden, further strengthening its financial position.

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Valuation and Metrics

At the upper price band of Rs 660 per share, Inox India is valued at a price-to-earnings (P/E) ratio of 39.2x with a market capitalization of Rs 5,990 crore. The company’s return on equity in FY23 was 28 percent, marking a notable increase from the previous fiscal year. These metrics suggest that the IPO is fairly priced, according to analysts.

Also See: Benefits and Risks of Investing in IPO

Innovations and Milestones

Inox India has been at the forefront of technological innovation in the cryogenic equipment industry. It is the first Indian company to manufacture a trailer-mounted hydrogen transport tank, developed in collaboration with the Indian Space Research Organisation (ISRO). The company has also successfully produced and shipped liquid hydrogen storage tanks to South Korea and other clients, underscoring its global capabilities.

Financial Performance

In FY23, Inox India reported a 17 percent year-on-year growth in net profit, reaching Rs 152.7 crore. Its revenue during the same period surged by 23.4 percent to Rs 966 crore. In the first six months of FY24, the company recorded a nearly 24 percent increase in net profit, amounting to Rs 103.3 crore, while its revenue grew by 16 percent to Rs 564.6 crore compared to the previous year.

Conclusion

The Inox India IPO offers investors an opportunity to be part of a company with a strong market position, technological innovation, and a promising future in the cryogenic equipment industry. Analysts’ recommendations to subscribe to the IPO for the long term are supported by the company’s financial performance, growth prospects, and its role in reducing carbon emissions through clean energy solutions like LNG and hydrogen. As the world continues its transition toward cleaner energy sources, Inox India appears well-equipped to thrive in this evolving landscape. However, as with any investment, it’s essential to conduct thorough research and consider your financial goals and risk tolerance before making any investment decisions.

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