IPO Size: Rs. 1,459 cr

• Entirely Offer for Sale (OFS) by promoter (99.3% to drop to 74.9%)

Price band: Rs. 627-660 per share

M cap: Rs. 5,990 cr, implying 24.4% dilution

IPO Date: Thu 14^th Dec to Mon 18^th Dec 2023, Listing Thu 21^st Dec 2023

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

India’s Largest Cryogenic Equipment Maker

Inox India is manufactures cryogenic (sub -100 degree Celsius temperature) equipment, used to store and transport industrial gas (oxygen, nitrogen, hydrogen etc.) and liquid natural gas (LNG). The 30 year old company, operating under brand ‘INOXCVA’, commands nearly 60% market share of the Rs. 3,200 cr domestic oligopolist cryogenic equipment market, serving oil and gas, fertilizer, medical, power and other sectors. Other 2 players operating in Indian market are large diverse MNCs.

Capacity Expansion

Company’s fixed assets have increased by 60% in past 18 months, to Rs. 214 cr, as of 30.9.23. It has 3 manufacturing facilities, with aggregate annual capacity of 3,100 equivalent tank units and a 4th plant is under construction, with Rs. 200 cr capex, to be entirely funded internally (Rs. 260 cr surplus cash as of 30.9.23) which is likely to be completed by FY25-end.

High Margin Business

Given the specialized technology of company’s products, its gross margin is 55% with 21% EBITDA margin, leading to a net margin of 16%. On Rs. 550 cr networth, RoE of 28% was reported, despite cash accounting for over 50% of networth, implying core RoE of nearly 70%.

Healthy Financial Performance

FY23 revenue rose 23% YoY to Rs. 966 cr, with EBITDA and PAT at Rs. 223 cr and Rs. 153 cr respectively, leading to EPS of Rs. 16.8. Half of the revenue is from exports, which have bright outlook as new greenfield capacities are coming on stream, especially in Americas.

H1FY24 grew 16% YoY to Rs. 564 cr, mainly led by exports of Rs. 351 cr. EBITDA rose 21% YoY to Rs. 146 cr in the first half, resulting in Rs. 103 cr PAT and EPS of Rs. 11.4 for H1FY24.

Current order book of Rs. 1,037 cr will be executed within a year, implying healthy ~20% topline growth.

Inox Group Pedigree

Privately owned by promoters in their individual capacity, Inox India is part of Inox Group, owning unlisted Inox Air Products (50% JV with US-based industrial gas company Air Products) and listed PVR-Inox (film exhibition business). They are different from Inox-GFL Group, having 3 listed companies Gujarat Fluorochemicals, Inox Wind and Inox Green Energy Services.

Attractively Priced

On FY24E EPS of Rs. 21, shares are being offered in the IPO at a current year PE multiple of nearly 31x, which is very attractive for the engineered product technology, high double digit net margins and presence in a growing industry. Company does not have any listed peers, but it is debt-free and tapping opportunities in the clean energy sector (providing solutions for ‘fuel-of-the-future’ hydrogen and commercial LNG) and is also a play on ‘Make in India’, both having tremendous potential.