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  • 14 Dec 2023
  • ICICIdirect

INOX INDIA LIMITED IPO: ALL YOU NEED TO KNOW

 

The third IPO that opens for subscription this month is Inox India Limited (IIL). To avoid any confusion, Inox here is not the multiplex chain. IIL is a niche player in cryogenic equipments and the only player from India. IIL opens for subscription on the 14th and closes on the 18th of December. In this article, we will look at the various aspects related to the company. It will help you decide whether to subscribe or invest in the IPO for the long term. 

Inox India Limited IPO: Key Details

Below are the key details related to the IIL IPO:

  • Issue Size: Rs 1,459.32 crore
  • Price Band: Rs 627 - Rs 660
  • Issue Details: Only Offer For Sale (OFS)
  • Market Cap: At the upper price band, Rs 5,990.39 crore
  • Minimum Investment: Rs 14,520

 

Inox India Limited IPO: About the business

The company offers solutions across design, engineering, manufacturing, and installation of equipment and systems for cryogenic conditions. They have been in the business for over 30 years. In terms of revenue (FY23), they are the largest supplier of cryogenic equipment in India. 

Inox India offers standard cryogenic tanks and equipment, beverage kegs, bespoke technology, equipment and solutions, and large turnkey projects that are used in diverse industries such as industrial gases, liquified natural gas (LNG), green hydrogen, energy, steel, medical and healthcare, chemicals and fertilizers, aviation and aerospace, pharmaceuticals and construction. In addition, they manufacture a range of cryogenic equipment utilized in global scientific research projects.

The company has a diversified customer base across industry sectors and geographies. In the six months ended September 30, 2023, and in FY23, FY22, and FY21, they have provided equipment and systems to 1,255 domestic customers and 254 international customers across three divisions (discussed in the next section). They have three manufacturing facilities located:

  • Kalol in Gujarat
  • Kandla Special Economic Zone (Kandla SEZ) in Gujarat 
  • Silvassa in the Union Territory of Dādra and Nagar Haveli.

 

Inox India Limited IPO: Business Division

IIL business comprises of three divisions:

  • Industrial Gas: It manufactures, supplies, and installs cryogenic tanks and systems for storage, transportation, and distribution of industrial gases such as green hydrogen, oxygen, nitrogen, argon, carbon dioxide (CO2), and hydrogen and provides after-sales services.  
  • LNG: This division manufactures, supplies, and installs standard and engineered equipment for LNG storage, distribution, and transportation and small-scale LNG infrastructure solutions suitable for industrial, marine, and automotive applications.
  • Cryo Scientific: It provides equipment for technology-intensive applications and turnkey solutions for scientific and industrial research involving cryogenic distribution. 
 
 

Inox India Limited IPO: Industry Overview

According to the CRISIL Report, the global cryogenic equipment market was valued at $11.5 billion in 2022. Global cryogenic equipment demand recorded a CAGR of 2.6% between 2017 and 2022. Demand saw a dip during the Covid-19 period of 2020 and 2021, declining at a CAGR of 1.2% between 2019 and 2021, as economic activity slowed down. However, in 2022, demand surpassed pre-Covid-19 levels marginally. According to the CRISIL report, the global cryogenic equipment demand is projected to grow at a CAGR of 6.9% from 2023 to 2028.

 

 

The Indian cryogenic equipment market size was estimated to be $353 billion in 2022. The demand for cryogenic equipment in India grew at a steady CAGR of 6.8% between 2017 and 2019. The lockdown and travel restrictions resulting from the COVID-19 pandemic saw the demand growth for cryogenic equipment stall for two years between 2019 and 2021. Going forward, demand for cryogenic equipment in India is expected to grow at a CAGR of 7.2% between 2023 and 2028, according to the CRISIL Report. 

 

 

Inox India Limited IPO: Listed Peers

There are no listed companies in India that engage in a business similar to that of Inox India. Therefore, it is not possible to provide an industry comparison in relation to IIL.

Inox India Limited IPO: Financials

Let us now look at the financials of Inox India to give you an idea of how the company has grown in recent years. Below are the financial numbers of IIL over the last three financial years:

  • The company has reported a revenue of Rs 593.80 crore, Rs 782.71 crore, and Rs 965.00 crore for FY21, FY22, and FY23, respectively. Revenue has grown at 27.46% CAGR in this period. The revenue for H1FY24 was Rs 564.61 crore.
  • For FY23, the industrial, LNG, and Cryo Scientific divisions contributed 70.88%, 24.89%, and 4.23% of the total revenue. The largest customer contributed 11.56% of total revenue, while the top 20 customers contributed 60.55% of its total FY23 revenue.
  • IIL has reported an EBITDA of Rs 149.70 crore, Rs 188.63 crore, and Rs 222.26 crore for FY21, FY22, and FY23, respectively. EBITDA margins for the same period were 24.58%, 23.47%, and 22.62%, respectively. The margins have declined slightly in this period. However, it has increased back in H1FY24 to 25.13%.
  • They have reported a net profit of Rs 96.11 crore, Rs 130.54, and Rs 152.71 crore for FY21, FY22, and FY23. The profits have grown at a decent rate in this period. The trend continued in H1FY24, the company reported a PAT of Rs 103.34 crore.
  • For the last three financial years, IIL reported an average EPS of Rs 14.97 and an average RoNW of 26.86%.
  • If we attribute FY24 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 29. 
  • Return on Equity (ROE) for FY22 and FY23 was 25.98% and 27.79%, respectively. ROCE for the same period was 33.70% and 36.53%, respectively.

 

What are the competitive strengths of Inox India Limited?

As per the company, their competitive strength is as below:

  • It is a leading Indian supplier and exporter of cryogenic equipment and solutions.
  • They are a large portfolio of specialized cryogenic equipment engineered to global quality standards.
  • The company has a diversified domestic and international customer base across industry sectors.
  • IIL's foundation is based on product development and engineering. They have an in-house engineering team to develop new products and solutions.
 

Risks associated with Inox India Limited

Below are the risks associated with the IIL:

  • The business is dependent and will continue to depend on its three manufacturing facilities. They are subject to certain risks in manufacturing processes, such as the breakdown or failure of equipment and industrial accidents that could lead to interruptions in business operations.
  • For FY23, 11.56% and 46.52% of revenue from operation was derived from their largest customer and top 10 customers, respectively. Cancellation by customers or delay or reduction in their orders could impact the company's business.
  • An increase in their component or raw material costs, or other input costs, may adversely affect the pricing and supply of their products and hurt IIL's business.

Cryogen leakage from equipment poses health hazards and their products face inherent risk due to the high pressures and low temperatures at which many of their cryogenic products are used and the inherent risks associated with concentrated industrial and hydrocarbon gases.