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    Inox Green

    INOXGREEN
    Power·31 Jan 2025
    Management Summary

    Inox Green Energy Services delivered robust financial performance in Q3 FY25, with significant year-on-year growth in revenue, EBITDA, and Cash PAT, driven by improved machine availability. The company is aggressively pursuing its target of a 10 GW O&M portfolio within 3-4 years through organic expansion and strategic NCLT-route acquisitions, with INR 300 crores already deployed for an acquisition. While Q3 margins saw a sequential dip due to seasonal maintenance, the full-year EBITDA guidance of 50% remains intact, and the Resco demerger is expected to further enhance shareholder value and operational efficiency.

    Highlights

    5

    • Revenue for Q3 FY25 increased by 22% YoY to INR 74 crores, demonstrating strong top-line growth.

    • EBITDA for Q3 FY25 grew by 23% YoY to INR 29 crores, indicating operational efficiency.

    • Cash PAT for Q3 FY25 surged by 76% YoY to INR 23 crores, reflecting enhanced profitability.

    • Machine availability for the wind O&M portfolio improved significantly to 96.2% for Q3 FY25 and 96.3% for the nine months FY25.

    • The company is on track to achieve its target of 10 gigawatts O&M portfolio in the next 3 to 4 years, supported by both organic and inorganic growth strategies.

    Concerns

    3

    • Q3 FY25 margins declined sequentially to around 46%, attributed to higher costs associated with scheduled maintenance for the upcoming wind season.

    • The NCLT acquisition process for a large company is lengthy, estimated to take 6 to 9 months for completion and consolidation.

    • Management deferred detailed reconciliation of current portfolio size to revenue figures, suggesting potential complexity in revenue recognition models.

    Key financials

    Single quarter

    06 metrics
    1. 01Revenue₹74 Cr+22%YoY
    2. 02EBITDA₹29 Cr+23%YoY
    3. 03Cash PAT₹23 Cr+76%YoY
    4. 04O&M Portfolio3.5 gigawatt
    5. 05Machine Availability96.2%

    Capital allocation

    3
    high confidence
    CategoryHeadline
    Debt

    Debt disclosed

    M&A

    Large NCLT Company

    acquisition · pending regulatory · Consideration ₹NaN (cash)

    Liquidity

    Cash ₹750 crores

    INR 550 crores received from a total INR 1,050 crores fundraise, with the balance callable. Additionally, INR 200 crores from previous funding is in the system. Another INR 200-250 crores planned for utilization in next 2-3 months.

    Guidance & targets

    6
    CategoryTargetPriority
    Capacity
    O&M Portfolio
    10 gigawatts
    		High
    Capacity
    Organic O&M Portfolio
    7.2 gigawatts
    		High
    Capacity
    Inorganic O&M Portfolio (Acquisition)
    2 to 3 gigawatts
    		High
    Capacity
    Organic O&M Portfolio (FY25 end)
    4 gigawatts (+/- 100-200 MW)
    		High
    Profitability
    EBITDA Margin
    50%
    		High
    Solar O&M
    Execution Start
    Next FY
    		High

    NCLT acquisition completion and consolidation

    Next 6-9 months (check for updates next quarter)
    CurrentIn advanced stages, COC controlled, process expected to take 6-9 months.
    TargetAcquisition completed, company folded into Inox Green, financials consolidated.

    Why it matters

    This acquisition is a key part of the inorganic growth strategy to reach 10 GW and will significantly impact the portfolio and financials.

    So hopefully, in the matter of 6 to 9 months, we can see this company being directly under the fold of Inox Green.

    How to verify

    capital_allocation.m_and_a[target='NCLT Acquisition'].status

    Risks & concerns

    3
    RiskSeverity

    Lengthy NCLT acquisition process

    The NCLT process for acquiring a stressed asset is described as 'a bit long and a bit lengthy,' estimated to take 6 to 9 months for the current target. — Management acknowledged

    medium

    Valuation for inorganic growth

    Management emphasized paying the 'right price for the right asset' and avoiding rich valuations, indicating a cautious approach to inorganic growth. — Management acknowledged

    medium

    Complexity of Wind O&M as a competitive barrier

    Management highlighted that wind O&M is a 'very complex business that everybody cannot get into,' which helps Inox Green maintain high EBITDA margins compared to simpler service contracts. — Management acknowledged

    low

    Q&A highlights

    8

    “See, so we've always been maintaining that you have to look at the margins in this business on a full year basis. And for that, we maintained the guidance of 50%. Now there may be quarterly variations. For example, in Q3 and Q4, we do the scheduled maintenance for us to get ready for the next wind season, which is Q1 and Q2 specifically. So, there are additional costs which we incur and book. So that varies the margins on a quarterly basis. But on a full year basis, 50% guidance remains.”

    Management explained the sequential margin dip, attributing it to seasonal scheduled maintenance costs, and reiterated the full-year EBITDA margin guidance of 50%.

    asked by Shweta Dikshit

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q3 FY25 Financial Performance

    Inox Green Energy Services delivered robust financial results for Q3 FY25, with revenue increasing by 22% year-on-year to INR 74 crores. EBITDA grew by 23% to INR 29 crores, and Cash PAT saw a significant jump of 76% to INR 23 crores. This strong performance was underpinned by an improved machine availability of 96.2% for the quarter and 96.3% for the nine months ended December 2024, reflecting continuous operational improvements.

    02

    Ambitious Portfolio Growth Targets

    The company is pursuing an aggressive growth strategy, aiming to expand its O&M portfolio to 10 gigawatts within the next 3 to 4 years. This target comprises both organic additions, projected to reach approximately 7.2 gigawatts, and strategic inorganic acquisitions, expected to contribute 2 to 3 gigawatts within the next 12 to 18 months. By the end of FY25, the organic portfolio is anticipated to reach around 4 gigawatts.

    03

    Strategic Inorganic Expansion via NCLT Route

    Inox Green is actively engaged in inorganic growth, having invested in the debt of a large company currently undergoing the NCLT process. Management expressed confidence due to their control over the Committee of Creditors and anticipates the acquisition to be completed and consolidated within 6 to 9 months. Approximately INR 300 crores from the recent fundraise have been allocated for this acquisition, which is expected to significantly boost the O&M portfolio.

    04

    Resco Demerger and Shareholder Value Creation

    The demerger of the Resco business, encompassing substation and global operations, is in progress, awaiting regulatory approvals from BSE and NSE, with the NCLT process expected to take 6-9 months. This strategic move is projected to benefit Inox Green shareholders by providing them with shares in the new Resco entity (20% of Resco for IGESL shareholders) and by transforming Inox Green into an asset-light company, thereby removing depreciation charges and improving its PAT and PBT.

    05

    Entry into Solar O&M and Hybridization

    Inox Green is expanding its service offerings into new business areas, including solar and hybrid project O&M, with execution expected to commence in the next fiscal year. While solar O&M margins are typically lower than wind, the company aims to achieve higher-than-industry-average margins through hybridization solutions and by leveraging synergies with its existing technical expertise and resources.

    06

    Capital Allocation and Fund Utilization

    The company successfully raised INR 1,050 crores, with INR 550 crores already received and the balance callable. Of the received funds, approximately INR 300 crores have been utilized for the ongoing NCLT acquisition, and INR 70-80 crores have been used for debt reduction. Management plans to deploy an additional INR 200-250 crores over the next 2 to 3 months, further strengthening the balance sheet and funding growth initiatives.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.