Solarium Green Energy Ltd. IPO: Key Details

Solarium Green Energy

• Solarium Green Energy is coming out with an initial public offering (IPO) of 54,99,600 equity shares in a price band Rs 181-191 per equity share.
• The issue will open on February 6, 2025 and will close on February 10, 2025.
• The shares will be listed on SME Platform of BSE.
• The face value of the share is Rs 10 and is priced 18.10 times of its face value on the lower side and 19.10 times on the higher side.
• Book running lead manager to the issue is beeline capital advisors.
• Compliance Officer for the issue is Pankti Kashyapbhai Thakkar. 

Profile of the company

Solarium Green Energy provides Turnkey Solar Solutions which involves design, engineering, procurement & supply, construction & erection, testing, commissioning, associated transmission system and comprehensive Operation & Maintenance (O&M) of solar power plants. It serves a wide range of projects, including Residential rooftop projects, Commercial and Industrial (C&I) roof top and Ground Mounted projects, as well as Government Projects. Along with its turnkey solutions, it is also involved in Sale of Solar Products i.e. Solar PV (Photovoltaic) Modules, Solar PV Inverters, Availability Based Tariff Meters (ABT) and other solar products. It is accredited with various certifications including BIS (Bureau of Indian Standards), ISO 9001:2015, ISO 14001:2015 and ISO 45001:2018.

The company is benefited from the extensive experience of its Promoters Ankit Garg and Pankaj Vallabhbhai Gothi, who are associated with the company since its incorporation and having combined experience of more than 20 years in the various industries including renewable energy industry. It attributes its growth and proven track record of implementing multiple projects to the competent leadership and guidance of its Promoters as well as to its dedicated and qualified team of professionals.

The company’s EPC (Engineering, Procurement and Commissioning) contracts are on turnkey basis, encompassing a comprehensive range of services. Its scope of services includes assessing the plant site/layout and its feasibility, selecting the plant configuration, conducting financial and technical evaluation of technology options, assessing technology risks and grid connectivity, detailed engineering, and defining contact structure. Additionally, it manages supply chain management, logistics, construction and site management, manpower management, and financial contours, while also providing warranties and guaranties. It also provides operations and maintenance (O&M) services to its government and nongovernment clients, which include testing and cleaning of solar panels, repair and replacement of damaged components and conducting inspection of solar systems.

Proceed is being used for:

• Meeting working capital requirement
• General corporate purpose

Industry Overview

In 2023, the world grid-connected 447 GW of new solar capacity, which, once again, dominated the newly added global power generation capacity. Solar PV accounted for 78% out of 576 GW of new renewable capacity added last year. Solar’s share of new renewable capacity increased considerably, up 12 percentage points from the 66% contributed in 2022 and 22 percentage points more than the 56% in 2021. This new record confirms solar’s role as an established and still rising leader of the global energy transition, installing over three times more capacity than all other renewable technologies combined. The 447 GW of new solar capacity broke any previous record and far exceeded any solar analyst’s expectations, marking an extraordinary 87% growth rate. This compares to 2022’s addition of 239 GW and 46% year-on-year growth. The surge in installed solar capacity can be attributed to several key factors. Firstly, a significant increase in global PV manufacturing capacities greatly improved the availability of solar modules following the supply chain issues experienced during the pandemic. This capacity expansion resulted in overcapacities and severe price drops for system components over the course of 2023, with modules’ values falling by around 50%. In addition, the effects of the 2022 global energy crisis continued to stimulate demand across various regions.

Eight of the top 10 largest solar markets experienced growth in 2023, with only India and Japan experiencing a downturn in their market. The United States got back on track after a turbulent solar business year in 2022 and recorded a 48% growth rate in 2023, with 32.4 GW of solar PV grid-connected. Germany installed 15 GW in 2023, marking a new record for any European country. The previous record was held by Italy with 9.3 GW installed long back in 2011, during the first boom phase of the European solar story. Comprised together, the top 10 markets represented 80% of the global solar PV market in 2023. Demand growth for solar PV power in the coming years is expected to grow substantially, driven by further cost improvements, product availability, and the numerous benefits the technology provides. Climate emergency will continue to capture governments’ attention, while energy security will remain a compelling argument to invest in solar power in a quickly fragmenting world order.

India has set a target to reduce the carbon intensity of the nation’s economy by less than 45% by the end of the decade, achieve 50 percent cumulative electric power installed by 2030 from renewables, and achieve net-zero carbon emissions by 2070. India aims for 500 GW of renewable energy installed capacity by 2030. An extremely ambitious scheme for residential consumers was announced by PM Narendra Modi, PM-Surya Ghar Muft Bijli Yojana, that will provide 300 units of electricity free of charge every month through solar rooftops to 1 crore, i.e., 10 million households. It would translate to setting up almost 30GW of solar residential rooftop capacity for a 3 kilowatt (kW) system. The scheme has an outlay of Rs 75,021 crore and is to be implemented till FY 2026-27.

Pros and strengths

Scaled and integrated operations for renewable energy projects: The company provides Turnkey Solar Solutions which involves design, engineering, procurement & supply, construction & erection, testing, commissioning, associated transmission system and comprehensive O&M of solar power plants. It serves a wide range of projects, including Residential rooftop projects, Commercial and Industrial roof top and Ground Mounted projects, as well as Government Projects. It has an integrated in-house approach to executing its renewable projects across the entire life cycle of developing a project, from signing of the project to commissioning of project and subsequently operating and maintaining the project, if applicable. It has leveraged its capabilities to capitalize on the growing renewable power industry in India and successfully won competitive bids for diverse renewable energy projects.

Diversified Portfolio with strong domestic presence: The company has a diversified portfolio of various projects across different renewable energy technologies. Its turnkey projects are located across 10 Indian states of Gujarat, Delhi, Rajasthan, Haryana, Punjab, Odisha, Maharashtra, Uttar Pradesh, Madhya Pradesh and Jammu & Kashmir. While in past, substantial of its turnkey solution business has been derived from the State of Gujarat, it has recently expanded its operations in Delhi, Haryana, Punjab, Odisha, Maharashtra, Uttar Pradesh, Madhya Pradesh and Jammu & Kashmir. It serves a wide range of projects, including Residential rooftop projects, Commercial and Industrial roof top and Ground Mounted projects, as well as Government Projects. Under Government projects, it has ongoing and completed projects such as Wind Solar Hybrid System, Solar Rooftop Power Generating System, Ground Mounted Projects, Solar Hybrid System and other projects such as Solar Water Heaters, Solar Tree and Solar CarPort.

Strong relationship with customers and suppliers: The company focuses on maintaining long term business relations with its customers. It is successful in building a strong client base for its business. Its existing business relations help it in getting repeat business from its customers. This has helped it to maintain a long-term working relation with its customers and improve its customer retention strategy. Its existing business relations with its clients represents a competitive advantage in gaining new clients and increasing its business. The company is also focused on building and maintaining long term relations with its suppliers. Its strong relations with suppliers will enable it to continue to grow its business. Due to its good relations with its suppliers, it gets timely supply of quality raw materials. This enables it to manage its inventories and supply good quality products on a timely basis to its customers. This in turn enables it to generate repeat business.

Risks and concerns

Significant revenue comes from limited customers: The company generate a significant portion of its revenues from, and are therefore dependent on, certain customers for a substantial portion of its business. The company has garnered 41.01%, 25.98% and 39.71% of its total revenue from top 10 customers in FY24, FY23 and FY22 respectively. The loss of one or more of these significant or key clients or a reduction in the amount of business it obtains from them could have an adverse effect on its business, results of operations, financial condition and cash flows. It cannot assure that it will be able to maintain historic levels of business and/or negotiate and execute long term contracts on terms that are commercially viable with its significant clients or that it will be able to significantly reduce customer concentration in the future. Any decline in its quality of services, growing competition and any change in the demand, may adversely affect its ability to retain them.

Key raw materials and components are sourced from a limited group of suppliers: The company is dependent on a limited number of suppliers for its key raw materials. The company procured 58.10%, 62.67% and 75.11% of its total raw materials supply from top 10 suppliers in FY24, FY23 and FY22 respectively. As a result, any failure of any of its suppliers to perform could disrupt its supply chain and materially and adversely affect its operations. In addition, it engages with local suppliers for raw materials for its projects and any adverse regulations for engaging local suppliers, import restrictions, transportation and related infrastructure failures could increase supply costs which could have a material adverse effect on its operations and financial condition.

Geographical constrain: The company’s entire revenue from operation is generated within India only. However, substantial part of its revenue is generated from the State of Gujarat i.e., Rs 6,208.31 lakh, Rs 13,949.27 lakh, Rs 7,416.31 lakh, and Rs 12,198.35 lakh, constituting 75.71%, 78.63%, 75.07% and 72.88% of the total revenue from operations for the six months period ended on September 30, 2024 and the financial year ended March 31, 2024, 2023 and 2022, respectively. Such concentration of revenue in the State of Gujarat may have an adverse effect. An economic slowdown or change of laws or regulations, particularly in relation to renewable energy sector in the State of Gujarat may have a significant adverse impact on its business, financial condition, cash flows and results of operations. 

Outlook

Solarium Green Energy is engaged in the business of Solar Solutions. The company provides turnkey solar solutions, including design, engineering, procurement, construction, testing, commissioning, transmission systems, and Operation & Maintenance for residential, commercial, industrial, and government solar projects. The company has diversified portfolio with strong domestic presence. On the concern side, the company’s business is dependent on few numbers of clients. Its Top 10 customers contributed 40.76%, 41.01%, 25.98% and 39.71% of revenue from operations in period/financial year ended on September 30, 2024, March 31, 2024, 2023 and 2022, respectively. The loss of any of these clients could have an adverse effect on its business, financial condition, results of operations and cash flows. The company’s revenues are highly dependent on its operations in the geographical region of the State of Gujarat. Any adverse development affecting its operations in this region could have an adverse impact on its business, financial condition and results of operations.

The company is coming out with a maiden IPO of 54,99,600 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 181-191 per equity share. The aggregate size of the offer is around Rs 99.54 crore to Rs 105.04 crore based on lower and upper price band respectively. On performance front, the total revenue from operations increased by 79.57% from Rs 9,878.98 lakh in Financial Year 2022-23 to Rs 17,739.69 lakh in FY 2023-24. The significant increase in revenue can be primarily attributed to the growth in income from government projects. For the FY 2023-24, Profit after Tax (PAT) surged by 796.68%, reaching Rs 1,558.97 lakh compared to Rs 173.86 lakh in FY 2022-23. This substantial increase in PAT is primarily due to a rise in revenue from operations, with a notable contribution from turnkey solution segment, which outpaced the growth in revenue from sales of products.

Expanding its project portfolio is vital to its growth strategy. To support seamless expansion, the company plans to invest in its business units and continuously refine its procedures across all stages of project development. This involves implementing standardized methods for selecting auction bids, evaluating land, securing necessary approvals from local or government authorities, designing and developing project sites, timely procurement of components, and project construction. By establishing these procedures, it aims to reduce development costs and enhance project timelines, leading to more efficient and timely project commissioning. It will continue to leverage its supplier relationships and diversify its supplier base to maintain a stable supply of high quality and cost-effective components.