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Initiating Coverage | 1 July 2015

Sector: Capital Goods

Inox Wind

Favorable winds
Satyam Agarwal (AgarwalS@MotilalOswal.com); +91 22 3982 5410
Amit Shah (Amit.Shah@MotilalOswal.com); +91 22 3029 5126

Inox Wind

Inox Wind: Favorable winds


Page No.
Investment summary .......................................................................................... 3
Wind energy sector at inflexion point .......................................................... 4-8
INXW: Prepped for rising wind capacity installation ................................. 9-13
Expect 65% earnings CAGR over FY15-17 .................................................. 14-16
Initiating coverage with Buy rating ........................................................... 17-18
Risks and concerns ...................................................................................... 19-20
Company background ....................................................................................... 21
Board of directors ....................................................................................... 22-23
Operating metrics ............................................................................................. 24
Financials and valuations ........................................................................... 25-26

Prices as on 1 July 2015

Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset
and S&P Capital.

1 July 2015

Inox Goods
Wind
Initiating Coverage | Sector: Capital

Inox Wind
S&P CNX
8,453

BSE Sensex
28,021

CMP: INR425

TP: INR543 (+28%)

Buy

Favorable winds
Expect 65% earnings CAGR over FY15-17; re-rating imminent
Stock Info
Bloomberg

INXW IN

Equity Shares (m)

221.9

M.Cap. (INR b) / (USD b)

84.9/1.3

52-Week Range (INR)

495/385

1, 6, 12 Rel. Per (%)

-3/-/-

Wind energy presents a strong growth opportunity with the markets likely to
expand from 2.3GW in FY15 per annum to 4-5GW per annum in the medium term,
aided by restoration of accelerated depreciation (AD) and generation-based
incentives (GBI).
We believe INXW is suitably placed and expect it to clock sales of 825MW in FY16
and become the number-1 player, with ~25% market share. Over FY15-17, we
expect INXW to deliver 28% volume growth.
Earnings should grow at a CAGR of 65% over FY15-17, driven by 44% revenue
CAGR and improvement in realization. We believe a re-rating is imminent. Buy.

Financial Snapshot (INR Billion)


Y/E March
2015 2016E 2017E
Net Sales
27.1 46.1 56.4

EBITDA

4.6

8.7

11.4

Adj PAT

3.0

6.1

8.0

13.4

27.3

36.2

102.0 104.1

32.7

Wind energy sector at inflexion point: The wind energy sector in India had
witnessed a sharp fall in capacity addition from 3.2GW in FY12 to 1.2GW in
FY13, led by withdrawal of accelerated depreciation (AD) and generation-based
incentives (GBI) in March 2012. However, renewable energy is now a key focus
area for the government, which has ambitious plans to set up an installed
capacity base of 60GW in the wind energy segment by 2022 (vs 23GW as at end
FY15). We believe there are multiple tailwinds that will help drive the size of the
Indian wind energy market from 2.3GW in FY15 to 4-5GW in medium term.

EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)

64.8

91.5 127.6

RoE (%)

20.6

29.8

28.3

RoCE (%)

19.2

32.8

32.1

31.8

15.6

11.7

6.6

4.6

3.3

21.1

11.4

8.2

Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)

Shareholding pattern (%)


As on
Promoter

Mar-15
85.6

DII

3.7

FII
Others

3.5
7.2

FII includes depository receipts

INXW prepped for rising wind capacity installation: In FY16, we expect INXW
to clock sales of 825MW and become the number-1 player, with ~25% market
share. INXW is well positioned to benefit from the wind market revival,
supported by (1) strong relationships with IPPs, (2) technology partnerships with
global leaders, (3) ready pipeline of project sites, (4) strategically located
manufacturing units, and (5) established execution track record.
Expect 65% earnings CAGR over FY15-17: We expect INXW to report 44%
revenue CAGR over FY15-17, largely supported by volume growth of 28% and
realization improvement of 8%. Operating profit is likely to witness 58% CAGR
over FY15-17, led by margin expansion of 330bp during the period. Margin
expansion to be supported by various initiatives including New product launch,
Improved logistics and supply chain benefits, Lower Royalty expense, Improved
Realizations, Recent duty benefits, etc. Driven by strong earnings growth and
debt repayment, we expect RoE to improve to 28% and RoCE to 32% in FY17.
Initiating coverage with Buy rating: INXW is well positioned to benefit from the
huge opportunity Indias wind power segment presents. We expect its revenue
to grow at a CAGR of 44% and earnings to grow at a CAGR of 65% over FY15-17.
Backed by its strong revenue and earnings growth, and robust return ratios (RoE
of 28% and RoCE of 32% in FY17E), we initiate coverage with a Buy rating. Our
target price of INR543 (15x FY17E EPS of INR36) implies 28% upside.

1 July 2015

Inox Wind

Wind energy sector at inflexion point


Multiple tailwinds; market size to double over FY15-22
n

The wind energy sector in India had witnessed a sharp fall in capacity addition from
3.2GW in FY12 to 1.2GW in FY13, led by withdrawal of accelerated depreciation (AD)
and generation-based incentives (GBI) in March 2012.
However, renewable energy is now a key focus area for the ruling BJP-led government,
which has ambitious plans to set up an installed capacity base of 60GW in the wind
energy segment and 100GW in the solar segment by 2022.
We believe there are multiple tailwinds that will help drive the size of the Indian wind
energy market from 2.3GW in FY15 to 4-5GW in medium term.

An enabling environment is in place


There are multiple factors supporting Indias wind energy segment: (a) the central
governments ambitious plans (60GW of wind energy capacity by 2022), backed by
fiscal and regulatory incentives (AD and GBI), (b) finalization of feed-in tariff and
regulatory support provided by state governments, (c) inclusion of renewable
generation obligation (RGO) in the Electricity Act, (d) untapped wind power
potential of 100GW (CWET study), and (e) long-term opportunities arising from
offshore wind power installation and repowering of old WTG sites. We expect the
Indian wind market size to grow from 2.3GW in FY15 to 4-5GW in medium term.
Exhibit 1: Favorable regulatory changes to boost wind energy investment
Accelerated Depreciation (AD)

Overview and Policy


Withdrawn in Mar 2012, reintroduced in Jul 2014 and notified in
September 2014
Impact: Brings back SME interest, Captive demand

Generation Based Incentives (GBI)

Withdrawn in Mar 2012, reintroduced in Mar 2013 and notified


in Sep 2013

INR0.50/unit incentive to generators with a cap of INR1 cr/MW,


up from Rs.0.62 cr/MW for 4-10th year

Impact: IPPs to focus on setting up new capacities


Access to low cost funding
National Clean Energy cess doubled to INR200/mt
This Fund to be used for GBI, low cost funding and green
corridors
Impact: Higher corpus available to facilitate growth

Mandatory CSR (Renewable)


Under new Companies Act, eligible companies have to spend 2%
of its average net profit on CSR activities
Renewable energy / WTG qualifies under mandatory CSR spend
Impact: Demand from Corporates / PSUs to strengthen

Renewable Purchase Obligation

Distribution companies are required to procure a percentage of


all electricity from renewables

Impact: Aids to meet the renewable energy sourcing target of 15%


by 2020
Other incentives

Fast tracking of implementation of Green Corridor will address


evacuation constraints

Long term funding to infrastructure projects (up to 25 years)


4% SAD on parts and RM for WTG manufacturing removed
Source: Company, MOSL

1 July 2015

Inox Wind
Exhibit 2: Wind Financing Policys evolution

Source:Industry Reports, MOSL

To spur growth in renewable energy sector, incentives like accelerated depreciation


(AD-introduced in 1990) and gross generation incentives (GBI- introduced in 2009)
were introduced; however these initiatives were withdrawn in 2012, which led to
slump in wind energy installation and FY13/FY14 saw a muted average addition of
1.9GW per annum, down from 3GW addition in FY12. With reinstallation of these
incentives in 2014, we expect Indian wind market size to grow from 2.3GW in FY15
to 4-5GW in medium term.
Inclusion of RGO norms in
Electricity Act to increase
demand for renewable
power installation

The Power Ministry plans to amend the Electricity Act to introduce renewable
generation obligation (RGO), whereby conventional power plant developers would
be obligated to generate ~10% power from renewable energy sources. Successful
inclusion and implementation of the RGO norms can help the wind market to
expand from 2.3GW in FY16E to 4-5GW per annum in the medium term.

State governments also encouraging wind energy


State governments hold the key for successful implementation of the central
governments ambitious capacity installation plan of 60GW. They play a key role in
land allocation for the wind sites, evacuating power and providing grid connectivity
to the power generated from the wind sites. States have provided incentives over
and above the central governments sops to attract investments in wind energy.

Key incentives provided by states


Feed-in tariff: Several states like Rajasthan, Madhya Pradesh, Gujarat, Andhra
Pradesh, Telangana, Maharashtra and Karnataka have provided preferential tariff
over and above MNREs GBI of INR0.5 per kilowatt-hour to attract investment. Some
have also increased wind power tariffs by 2-15% to attract investments. These states
are expected to witness traction and will play a critical role to achieve the aggregate
target of 4-5GW per annum.

1 July 2015

Inox Wind
Exhibit 3: Preferential Feed in tariff (FIT) provided by states
State
Andhra Pradesh
Gujarat
Chattishgarh

Gujarat
Haryana

J&K

Karnataka
Kerala
Madhya Pradesh
Maharashtra

Orissa
Punjab
Rajasthan
Tamil Nadu
Uttarakhand

Uttar Pradesh
West bengal

FiT (INR/KWh)
4.7
4.15
WPD >200w/m2:6.25
WPD 201-250w/m2:5.68
WPD 251-300w/m2:5.00
WPD 301-400/m2:4.17
WPD>400/m2:3.91
4.15
WPD 201-250w/m2:5.81
WPD 251-300w/m2:5.06
WPD 301-400/m2:4.31
WPD>400/m2:3.88
CUF20% 5.80
CUF22% 5.27
CUF25% 4.64
CUF30% 3.87
CUF32% 3.62
4.2
4.77
5.92
WPD 200-250w/m2:5.7
WPD 250-300w/m2:5.01
WPD 300-400w/m2:4.18
WPD>400w/m2:3.92
4.48
5.8
5.12 (for projects in Jaisalmer, Jodhpur and Barmer
5.38 (for others)
3.51
WPD >200w/m2:5.0
WPD 201-250w/m2:4.45
WPD 251-300w/m2:3.80
WPD 301-400/m2:3.05
WPD>400/m2:2.80
3.21; escalation of 5.71 for 10 years
Tariff cap of 5.71 for 10 years

Reduced or no VAT: Several states including Tamil Nadu, Karnataka, Maharashtra


and Gujarat have policies that eliminate or reduce value-added tax (VAT) for wind
turbine components.
Exhibit 4: VAT benefit provided to attract investments in states
State
Tamil Nadu
Karnataka
Gujarat
Maharashtra

VAT rates
Reduced VAT from 14.5% to 5%
5.50%
5%
5%
Source: Company, MOSL

Wheeling and banking: For wind power, wheeling charges (paid to the distribution
company to use transmission infrastructure to send power from offsite locations)
for different states are in the range of 2% (Madhya Pradesh and Maharashtra) to
7.5% (West Bengal). Of the total wind energy fed to the grid in a financial year, Tamil

1 July 2015

Inox Wind

Nadu allows 5% and Karnataka 2% as banked energy that can be accessed any time
during the financial year.
Green cess fund: The Maharashtra Energy Development Agency (MEDA) has created
a green cess (tax) fund. A part of this fund is used to create infrastructure for grid
connectivity with proposed wind farms. Strong evacuation infrastructure promotes
investments in wind power.
Land facilitation policy: State governments like Rajasthan, Madhya Pradesh and
Gujarat have formalized land facilitation policies to expedite wind energy projects.
Major projects get delayed mainly on account of delays in land acquisition.
Exhibit 5: Land facilitation policy
State

Land Facilitation Policy

Rajasthan

Government land at concessional rates -- 10% of DLC rates, with maximum allocation of 5 Hect./MW.
The conversion charges (private land to industrial use) will be 10% of charges levied for industrial purposes under the
relevant rules.

Madhya Pradesh

Government revenue land use permission at INR1/-(token) premium per year (as per circular No. F-16-3-93-VII-2A,
dated 06-09-2010 and No. F-6-53-2011-VII-Nazool, dated 08-08-2011)

Gujarat

WTGs may be set up on private land, or revenue wasteland / GEDA land, if available

Maharashtra

Developer/Investor can be allotted Government barren land (permissible for industrial use), at declared windy sites, on
lease basis with 30 yrs agreement

Andhra Pradesh

Each eligible developer may be allocated available Govt. land to harness up to a maximum of 200mw of wind power
initially. After commissioning of 100 MW capacity Wind farms in 1st stage in the allocated Govt. land, the Government
may allocate land for another 100 MW capacity Wind Farms. The application from the developers for Government land
will be considered on a first-cum-first-served basis.

India has significant untapped wind potential

Source: Company, MOSL

According to the Centre for Wind Energy Technology (C-WET), India has the
potential to install over 100,000MW of wind turbines at 80meters hub height,
implying an untapped wind power potential of 78GW. Based on C-WET estimates,
India has explored only 22% of its wind power potential. This indicates strong longterm business opportunity for domestic WTG manufacturers.
Exhibit 6: Potential v/s currently installed capacity (MW)
State / UTs
Andhra Pradesh
Gujarat
Jammu & Kashmir
Karnataka
Kerala
Madhya Pradesh
Maharashtra
Odisha
Rajasthan
Tamil Nadu
Uttarakhand
Uttar Pradesh
Others
Total

Installable Potential
@50 m
@80 m
5,394
14,497
10,609
35,071
5,311
5,685
8,591
13,593
790
837
920
2,931
5,439
5,961
910
1,384
5,005
5,050
5,374
14,152
161
534
137
1,260
489
1,833
49,130
102,788

Installed Capacity
913
3,581
2,549
35
567
4,370
3,053
7,394
22,462

Source: C-WET,Company, MOSL

1 July 2015

Inox Wind

Offshore and Repowering to be long-term demand drivers


Offshore wind: The Ministry of New and Renewable Energy (MNRE) issued a draft
policy for the development of offshore wind energy in 2013, which aims to deploy
wind farms within territorial waters (12 nautical miles). Preliminary assessments
indicate that the coastlines of Tamil Nadu (Rameshwaram and Kanyakumari) and
Gujarat have reasonably high offshore wind potential. A recent study conducted by
WISE estimates Tamil Nadus offshore wind potential at 127GW at 80 meters height,
though this is yet to be corroborated by other studies (MNRE, 2013E). A separate
study estimates that India has the potential to develop 350GW of offshore wind
energy (PIB, 2013). Offshore wind energy offers a strong business opportunity for
INXW.
Repowering: Repowering low-capacity and aging wind turbines to improve
efficiency, or to achieve better grid integration or higher energy yield could be
another big business opportunity in India. Currently, Germany, Denmark, the US and
the Netherlands are at the forefront of the repowering movement. Indias current
repowering potential is estimated at ~2,760MW (GWEC, 2012A), but there are
several practical challenges (involving land ownership, lack of supporting state
policies or economic incentives), which hinder the realization of this potential. Tamil
Nadu, which has several aging (older than 15 years) wind farms located in wind-rich
districts, is a state with high repowering potential. Gamesa is the first company to
implement a wind repowering project in India, Project Avatar in Tamil Nadu in
2011 (MNRE, 2011A).

1 July 2015

Inox Wind

INXW: Prepped for rising wind capacity installation


To become number-1 player, with 25% market share
n
n

In FY16, we expect INXW to clock sales of 825MW and become the number-1 player,
with ~25% market share.
INXW is well positioned to benefit from the wind market revival, supported by (1)
strong relationships with IPPs, (2) technology partnerships with global leaders, (3)
ready pipeline of project sites, (4) strategically located manufacturing units, and (5)
established execution track record.

Well-balanced, differentiated business model


In India, 80% of the wind energy projects are executed on turnkey basis, as wind
power developers do not have in-house capabilities to undertake project
development on a large scale. INXWs business model, however, is equally focused
on turnkey solutions and WTG supplies. While turnkey solutions contribute 48% of
its orderbook, WTG supplies constitute 52%. Its balanced business model helps
INXW to optimally utilize its organizational resources. Project execution on EPC basis
can severely constrain organizational bandwidth.
INXW provides turnkey solutions together with its wholly-owned subsidiaries, Inox
Wind Infrastructure Services Limited (IWISL) and Maruti-Shakti India Limited
(MSEIL). Its services include wind resource assessment, site acquisition,
infrastructure development, erection and commissioning, and long-term operation
and maintenance of wind power projects.
Exhibit 7: Complete solution provider to customers
Wind Farm Identification

n
n
n
n

Power Evacuation

n
n
n

Infrastructure Development

n
n

Support for all government


approvals

n
n

Engineering, Procurement
and Construction

n
n
n
n
n

Operation and Maintenance

n
n
n
n

Post commissioning Support

n
n

Wind resource assessment to identify suitable site for a wind farm and physical assessment of the site
Energy assessment of the site
Identification of land including revenue, private, forest and tribal land
Approach road and logistic feasibility
Study of power evacuation options at site
Finalization of evacuation grid substation based on load flow study and capacity
Land or light of way for the transmission line
Development and construction of infrastructure for wind farm
Land development to enable installation of WTGs
Assist the customer in connection with obtaining statutory approvals necessary to install and operate the
wind farm and common infrastructure facilities including the sub-station and transmission lines
Provide support in connection with power purchase agreements and wheeling and banking agreements
with state distribution companies
Construction of WTG tower foundations
Supply, erection and installation of turbines
Construction and installation of a unit sub-station and switch yard at each WTG
Installation of an energy meter to measure electricity generated
Pre-commissioning and commissioning of WTGs
24/7 operation and maintenance of WTGs and wind farms, including preventive maintenance of WTGs,
unit sub-stations and common infrastructure facilities including sub-station and transmission lines
Maintain spares and consumables for operation and maintenance of turbines
Installation of supervisory control and data acquisition for order management
Provide various manpower, including with respect to wind farm security
Support for registration for renewable energy certificates (REC), generation based incentives (GBI) and
clean development mechanism (CDM)
Dedicated customer relationship management for customers daily generation report, monthly billing and
other support
Source: Company, MOSL

1 July 2015

Inox Wind

INXW has focused on the IPP segment and is the preferred partner for 8 of the top10 IPPs in India. Focus on IPPs and timely project execution has helped INXW to
develop strong relationships with the IPPs. The government is encouraging
renewable energy projects and targets to have an installed capacity of 60GW by
2022. Encouraged by the enabling government policies, several IPPs have firmed-up
strong capacity addition plans. Given INXWs relationships with the IPPs, we believe
it is in a sweet spot.
Its successful IPO has improved INXWs profile as a serious player, even for several
MNC PE funds / IPPs setting up wind power projects in India. This should drive
greater acceptance and also enable the company to match market pricing against a
new entrants strategy of offering discounts. In the equipment supply business,
INXW is among the top-2 players in India; while the size of this segment is 15% for
the WTG industry, it is targeted to contribute 30% to INXWs revenue in FY16.
Exhibit 7: Future plans of key IPPs in India
Key Players
Renew Energy
Continuum Wind
Mytrah Energy Limited
Bharat Light and power
CLP India
Tata Power
Hero Future Energies Pvt

MW
500
145
525
200
1,081

Comments
450MW pipeline to be commissioned in 2015
270MW under construction,580MW under development
Plans to have 1,000MW installed capacity by 2017
Plans to have 1,000MW installed capacity by 2019
263MW of wind power plant are under construction

471 469MW wind energy assets under construction across the world
78 Plans to have 1,000MW installed capacity by 2017
Source: Company, MOSL

Exhibit 8: Key WTG manufacturers in India with installed capacity of ~10GW


Company
Gamesa Wind Turbine Private Limited
GE India
Inox Wind Ltd.
Kenersys India Pvt. Ltd.
Leitner Shiram Manufacturing Ltd.
ReGen Powertech Pvt. Ltd.
Suzlon Energy Limited
Vestas Wind Technology India Pvt. Ltd.
WinWinD Power Energy Pvt. Ltd.

Installed Capacity
(MW)

Product Range
(KW)

Technology
tie-up

Gamesa
1,500
800/850/2,000
GE
450
1,500/1,600
1100
2,000 AMSC- Austria
Kenersys
400
2,000
250
1,350/1,500 WindFin B.V.
VENSYS
750
1,500
3,700 600/1,250/1,500/ Suzlon Energy
1,000 1,650/1,800/2,000 Vestas Wind
WinWinD,
1,000
1,000
Source: MOSL, Company

Strong order book, ready pipeline of project sites provide comfort


As of March 2015, INXWs order book stood at 1,178MW, comprising 614MW for
the supply and erection of WTGs and 564MW for the supply of WTGs. The order
book includes executed binding contracts for 825MW and term sheets (or letters of
intent) for 432MW. Also, INXW has access to project sites in Rajasthan, Gujarat,
Andhra Pradesh, Maharashtra and Madhya Pradesh suitable for the installation of
an aggregate capacity of 4,402MW, which makes available strong ready
infrastructure to provide turnkey solutions. Robust order book and ready pipeline of
project sites provides comfort on the revenue visibility front. We expect INXW to
deliver 825MW in FY16 and 950MW in FY17.

1 July 2015

10

Inox Wind
Exhibit 9: Order book composition FY15

Exhibit 10: Project pipeline of 4.4GW


Wind Sites under acquisition
process (MW)

Acquired Wind sites (MW)


Rajasthan
Supply and
Erection, 48
%

Supply of
WTG, 52%

1,355

Rajasthan

1,194

Gujarat

430

Gujarat

164

Madhya Pradesh

285

Madhya Pradesh

634

Andhra Pradesh

20

Maharashtra

300

Andhra Pradesh
Total

2,090

Total

20
2,312

Source: Company, MOSL


Source: Company, MOSL

Exhibit 11: Robust order inflow led by finalization of orders Exhibit 12: Turnkey segment sales to reduce, improving
from IPPs
organizational bandwidth to increase volumes
Turnkey Sales (%)

Order inflow (MW)

Equipment Sales (%)

1,162
13%

12%

87%

88%

FY14

FY15

30%

36%

70%

64%

FY16E

FY17E

630
100%
14
FY11

120

FY12

100%

100%

198

FY13

FY14

FY15

FY11

FY12

FY13

Source: MOSL, Company

Source: MOSL, Company

Technology tie-ups help save on R&D cost


INXW has entered into technology tie-ups with global players to source key
components of the WTG equipment. Technology tie-ups ensure that INXW has
access to latest technology and also saves on R&D cost, which helps to keep its cost
structure lean.
n

n
n
n

1 July 2015

WTG technology: INXW has licensed the technology to manufacture 2MW


WTGs in India from AMSC Austria, and has an exclusive and perpetual license in
India. In August 2014, INXW and AMSC amended the agreement to cover all
2MW WTGs with rotor diameters between 85 meters and 120 meters. In
addition, INXW has a non-exclusive license to manufacture 2MW WTGs
worldwide based on AMSCs proprietary technology. Globally, over 15GW of
aggregate production capacity operates on AMSC technology.
Electronic control system (ECS): As per the terms of license from AMSC, INXW is
required to purchase ECS manufactured by AMSC or its affiliates.
Rotor blade sets: INXW has a non-exclusive perpetual license from
WINDnovation Engineering Solutions GmbH, Germany.
Gearboxes and generators: INXW procures gearboxes from DHHI (China) and
Wikov Industry a.s. (Czech Republic), and generators from Emerson Industrial
Automation and ABB India.

11

Inox Wind

Strategically located manufacturing units ensure efficient cost structure


INXW manufactures the key components for WTGs in-house, which ensures cost
competitiveness, cost-effective logistics, and attractive margins. It has split its
manufacturing activities to ensure cost-efficiency. The existing rotor blade and
tower manufacturing facilities are located at Rohika in Gujarat, adjacent to a
highway to facilitate easier handling during transportation to wind sites and sea
ports. This location is also close to states like Rajasthan, Gujarat, Maharashtra and
Madhya Pradesh, where there is good potential for wind energy production. The
more easily transportable nacelles and hubs are manufactured in Himachal Pradesh,
which gives INXW certain tax incentives.
INXW is putting up a new integrated manufacturing facility at Barwani, Madhya
Pradesh to produce nacelles and hubs, rotor blade sets and towers. This is close to
projects in Madhya Pradesh (MP) and Rajasthan. Expansion at MP, coupled with
capacity augmentation at Gujarat would lead to a near doubling of capacity to
1.6GW by the end of FY16. On completion, total capacity would be 950 nacelles and
hubs, 800 rotor blade sets, and 600 towers.
Exhibit 13: Doubling manufacturing capacity to 1.6GW by end FY16
Installed Annual
Production Capacity

Post
Proposed Expansion

550

550

400

Madhya Pradesh

400

Towers

Madhya Pradesh

300

Rotor blade sets

Gujarat

256

400

Towers

Gujarat

150

300

Component(s)

Plant Location

Nacelles and Hubs

Himachal Pradesh

Nacelles and Hubs

Madhya Pradesh

Rotor blade sets

Source: Company, MOSL

Back-to-back warranty tie-ups with suppliers obviate provision requirement


INXW outsources raw material and components that it does not manufacture inhouse. It sources a portion of the towers required for WTGs from Fedders Lloyd
Corporation. It has a license from AMSC for the production and sale of 2MW WTGs
in India based on AMSCs proprietary technology. It also purchases ECS
manufactured by AMSC or its affiliates for all WTGs based on AMSC technology.
INXW gets warranties from component and raw material suppliers against deficient
performance and resultant liabilities.

Shift in customer profile from individuals to IPPs augurs well for INXW
The average wind installation size in India has been increasing with the shift in
customer base from individuals (AD market) to IPPs (GBI market). The average
project size has increased from 2MW in 2009 to 7MW in 2013. Project size of 50MW
and above is becoming the norm for IPPs in India. This customer profile shift augurs
well for INXW, as its business model is focused on the IPP segment rather than the
accelerated depreciation (AD) market. It is the preferred partner for 8 of the top-10
IPPs in India. Focus on IPPs and timely project execution has helped INXW to
develop strong relationships with the IPPs. Encouraged by enabling government
policies, several IPPs have firmed-up strong capacity addition plans. Given INXWs
relationships with the IPPs, we believe it is in a sweet spot.
1 July 2015

12

Inox Wind
Exhibit 14: Shift in project size and customer profile in India
<10 MW
2

3
7
17

10-25MW

25

5
19

25-50MW

15

74

73

>50MW
12
24

40

23

21

60

23

41

15
2009

2010

2011

2012

2013

Source: Company, MOSL

Operation and maintenance business provides interesting opportunities


As of December 2014, 742MW produced and sold by INXW were under operation,
84MW had been erected but not commissioned, and 312MW had been supplied but
not yet erected and commissioned. Given its cumulative supplies of 1,044MW,
operation and maintenance (O&M) provides interesting opportunities. We expect
the contribution of O&M to increase meaningfully post the two-year warranty. The
equipment supplier retains O&M on 100% of the projects and the business has gross
margins of 50-55%. The typical cost for O&M stands at ~INR1m/MW per annum. We
expect the O&M business revenue to scale up from INR39m in FY14 to INR594m in
FY17 (147% CAGR).
Exhibit 15: Robust 82% CAGR expected in installed base over Exhibit 16: O&M revenue to increase exponentially as
FY15-17E
installed base increases
WTG comissioned (MW)

O& MRevenue (INR M)

Installed base (MW)

2,802

2,428
1,516

154

318

FY13

150

468

FY14

742

774

1,212
913

274

FY15

FY16E

FY17E

Source: Company, MOSL

1 July 2015

39

159

FY14

FY15

374

FY16E

594

FY17E

FY18E

FY19E

Source: Company, MOSL

13

Inox Wind

Expect 65% earnings CAGR over FY15-17


Return ratios to improve
We expect INXW to report 44% revenue CAGR over FY15-17, largely supported by
volume growth of 28% and realization improvement of 8%.
Operating profit is likely to witness 58% CAGR over FY15-17, led by margin expansion
of 330bp during the period.
Driven by strong earnings growth and debt repayment, we expect RoE to improve to
28% and RoCE to 32% in FY17.

n
n
n

Expect revenue CAGR of 44% over FY15-17


We expect revenue to grow at a CAGR of 44% over FY15-17, led by volume CAGR of
28% and 8% increase in realization. Growth in realization would be driven by
increase in sales of the new Rotor 100 product, which provides 15% higher energy
efficiency with 5% increase in cost, and by reduction of discounts.
Exhibit 17: Improvement in realization led by increase in sales Exhibit 18: Revenue to witness 44% CAGR over FY15-17 led by
of new product Rotor 100
volume growth and better realization
Realization-WTG (INR M/MW)
47.9

73

47.5

45.0

42.9

41.6

Realization-EPC (INR M)

Revenue (INR M)
73

Growth-YoY %
70

48

6.6

FY13

11.7

FY14

11.0

7.6

FY15

FY16E

11.6

FY17E

10,589

15,668

FY13

FY14

46,098

56,352
22

FY16E

FY17E

27,099

FY15

Source: Company, MOSL

Source: Company, MOSL

Exhibit 19: Revenue mix to move in favor of newly introduced 100 metre WTG (INR B)
93 metre

100 metre

113 Metre

EPC

O&M

60
50
40
30
20
10
FY11

FY12

FY13

FY14

FY15

FY16E

FY17E

Source: Company, MOSL

Operating profit to post 58% CAGR over FY15-17, led by margin expansion
We expect operating profit to witness 58% CAGR over FY15-17, led by 330bp margin
expansion during the period. Operating margin would expand to 20.1% in FY17.
Management expects margin expansion to be supported by factors like (i) increase
in sales of Rotor 100 metre blades (150bp), (ii) improved supply chain/logistics,
better cost absorption, etc (130bp), (iii) improved market perception, leading to
lower discounts on pricing (100bp), (iv) gains from lower special additional duty
1 July 2015

14

Inox Wind

(100bp), and (v) lower royalty expense (50bp). Inox has to pay fixed royalty per WTG
for the first 450 WTGs with rotor diameters of 93.3 meters and 100 meters, and the
first 245 WTGs with rotor diameters of 113 meters, that it produce. Lower Royalty
payment is primarily on account of extinction of royalty payment on the 93.3 metre
product. We conservatively model margin to increase from 16.9% in FY15 to 20.1%
in FY17E, (expansion of 330bps) to factor in i)increase in competitive intensity with
Suzlon getting aggressive post financial restructuring ii) INXW does not make
warranty provision as against 3% provision made by SUEL.
Exhibit 20: Margins to expand primarily on account of cost Exhibit 21: Operating profit to witness 58% CAGR over
efficiencies
FY15-17
Operating Profit Margin
18.6

Operating Profit

Net Profit Margin

16.9

18.8

20.1

13.1

14.2

Growth YoY %

159.6
89.3

11.2
14.2
8.4
FY2013

FY2014

10.9

FY2015

FY2016E

8,659

-10.3

FY2017E

1,965

1,762

FY2013

FY2014

31.1
11,354

4,574
FY2015

FY2016E

Source: Company, MOSL

FY2017E

Source: Company, MOSL

Cash flows from operations as well as free cash flows to turn positive from
FY16
Historically, INXW has witnessed negative cash flow from operations on account of
elongated working capital cycle, as net working capital (NWC) for the industry has
deteriorated meaningfully since FY13. Collapse of the accelerated depreciation (AD)
market had resulted in an increase in the bargaining power of IPPs. We expect
INXWs NWC, which had peaked at 196days in FY15 to normalize at 148 days in
FY17. This is because the AD market is picking up again, the willingness of banks to
fund RE projects is increasing, and the bargaining power of equipment
manufacturers is increasing. NWC normalization would drive meaningful
improvement in cash flows from operations.
Exhibit 22: Cash flow to improve led by normalization of Exhibit 23: NWC to normalize with
working capital cycle
receivables cycle
Cash flow from operation (INR b)

Free cash flow (INR b)


4.2

7.0

NWC (days)
7.2
161

0.7

improvement in

Net cash (INR b)


2

196
165

148

148

(2)

(1.2)

(3)

(1.3)
(0.9)
(3.3)

(5.1)
FY2013

FY2014

(3.0)

FY2015

(4)
FY2016E

FY2017E

Source: Company, MOSL

1 July 2015

(4)

FY2013

FY2014

FY2015

FY2016E

FY2017E

Source: Company, MOSL

15

Inox Wind

Return ratios to improve


We expect return ratios to improve, led by strong earnings growth and debt
repayment. We expect RoE and RoCE to improve to 28% and 32%, respectively in
FY17.
Exhibit 24: Robust return ratios led by strong earnings and debt repayment
RoCE

RoE

51
33

31
21

30

29

FY2013

18

19

FY2014

FY2015

32
28

FY2016E

FY2017E
Source: Company, MOSL

Exhibit 25: NWC to improve led by better receivable cycle management


NWC (Days)
Inventories
Debtors Excluding Retention money
Loans and Advances
Other Current Assets
Total Current Assets
Creditors
Current Liabilities (excl Cust Adv)
Provisions
Total Current Liabilities
Core NWC
Retention Money
Customer Advances
Reported NWC

FY13
27
172
33
4
237

FY14
63
165
34
10
272

FY15
15
150
90
5
290

FY16E
15
140
88
3
258

FY17E
15
140
88
3
246

79
9
1
89
148
3
145

98
12
1
112
161
3
158

76
10
7
94
196
196

80
6
7
93
165
165

85
6
7
98
148
148

Source: Company, MOSL

1 July 2015

16

Inox Wind

Initiating coverage with Buy rating


Target price of INR543 implies 28% upside
We believe INXW is well positioned to benefit from the WTG demand arising from
the governments ambitious target to install 60GW capacity from wind energy by
2022, and WTG demand revival led by fiscal and regulatory incentives provided by
central and state government. We expect INXW to post revenue of INR46.1b in FY16
(up 70%), INR56.3b in FY17 (up 22%). We expect INXW to report not just strong
revenue growth but also report far superior earnings growth. We expect INXW to
report EPS of INR27.3 in FY16E (up 104%) and INR36 in FY17E (up 33%). Backed by
strong revenue and earnings growth and robust return ratios (RoE of 28% and RoCE
of 32% in FY17), we initiate coverage on the stock with Buy rating and target price of
INR543 (15x FY17 EPS of INR36).
Our target PER of 15x is lower than Industrials / Capital Goods players like L&T (22x
FY17E), TMX (28x FY17E), etc and is constrained by the following factors:
n INXWs earnings are prone to volatility, given the characteristics of the wind
sector that has historically witnessed large swings in capacity additions, led by
changes in government policy. Even in most of the mature markets, the industry
has not demonstrated a secular growth characteristic.
n Health of SEB finances remain the key concern, as SEBs have generally been
reluctant to purchase expensive source of power. Challenges like poor
investments in evacuation infrastructure, backing down in peak generation
season, non availability of adequate power banking facilities, non-compliance to
RPO obligations, etc are yet to be decisively addressed. Challenges in land
acquisition could also be a constraining factor to industry growth.
n SUEL, a key competitor, had been impacted by constrained financial position
and post the recent fund infusions by DSA / sale of Senvion, could become
aggressive.
Exhibit 26: Exhibit 26: Key financials of WTG players in India
Revenue (INR m)

EBIDTA Margin (%)

PAT Margin (%)

Gamesa

FY12
22,847

FY13
11,610

FY14
35,298

FY15
NA

FY12
NA

FY13
NA

FY14
NA

FY15
NA

FY12
-4.4

FY13
-19.0

FY14
1.6

FY15
NA

Vestas

17,515

5,047

7,951

NA

3.7

2.6

5.3

NA

0.8

-0.2

-1.4

NA

Suzlon

100,030

32,280

56,270

48,830

7.9

-51.1

-14.4

-3.4

-10.4

-118.4

-53.1

-48.7

NA

10,589

15,668

27,099

NA

18.6

11.2

16.9

NA

14.2

8.4

10.9

Inox Wind

Source: Company, MOSL

Exhibit 27: Key financial comparison for global WTG players (USD m)
Company Name

MCap

Revenue

EBITDA Margin (%)

PAT

PE (x)

EV/EBIDTA (x)

CY15E

CY16E

CY15E

CY16E

CY15E

CY16E

CY15E

CY16E

CY15E

CY16E

2,018

2,273

2,411

8.2

9.1

78

100

26.0

20.9

9.1

7.8

11,370

8,731

8,704

13.8

14.2

577

600

19.6

18.8

7.9

7.7

Gamesa Corp Tecnologica SA

4,656

3,759

4,032

12.5

12.8

198

235

23.9

19.9

10.2

9.3

Xinjiang Goldwind Science & Te

8,375

3,636

3,831

16.3

18.9

379

433

19.9

Nordex SE
Vestas Wind Systems A/S

1 July 2015

17.4
16.5
13.5
Source: Bloomberg, MOSL

17

Inox Wind

Exhibit 28: Comparision of Inox Wind with Suzlon (INR m)


INR M
FY11
91,750
59,700
29,405
8,746
18,962
0
1,697
610
2,307
3,410
-1,103
9,488
-10,591
-8,318

FY12
100,030
63,920
36,110
10,270
18,890
430
6,520
0
6,520
3,890
2,630
13,740
-11,110
-10,440

32%
2%
1%

36%
8%
6%

WTG Sales (MW)


- India
Realization (INRM/MW)
Revenues (INR M)

1,521
955
56
84,650

Installed (MW)
O&M Revenues (INR M)

11,541
7,100

Revenues
Less: COGS
Gross Profit
Employee Expenses
Other expenses
Exchange (Loss) / Gain
EBITDA
Other Income
EBIDTA incl Other Income
Depreciation
EBIT
Interest Expense
PBT
Adjusted PAT
Gross Margin (%)
EBIDTA Margin (%)
EBIT Margin (%)

1 July 2015

Suzlon Wind
FY13
32,280
26,160
6,120
8,330
15,980
2,500
-20,690
0
-20,690
4,280
-24,970
15,320
-40,290
-38,220

Inox Wind
FY13
FY14
10,589
15,668
7,731
12,131
2,858
3,537
250
384
644
1,390
0
0
1,965
1,762
48
91
2,012
1,854
89
116
1,923
1,738
388
460
1,536
1,278
1,503
1,322

FY14
56,270
43,351
12,919
7,874
15,870
2,326
-13,151
0
-13,151
3,745
-16,896
17,850
-34,746
-29,890

FY15
48,830
31,380
17,450
7,470
13,360
4,950
-8,330
0
-8,330
3,760
-12,090
17,660
-29,750
-23,760

FY11
719
518
202
38
46
0
118
10
128
39
88
44
45
54

FY12
6,216
4,318
1,898
146
334
0
1,418
4
1,422
76
1,346
152
1,194
1,007

19%
-52%
-80%

23%
-14%
-27%

36%
-3%
-17%

28%
16%
12%

31%
23%
22%

27%
19%
18%

23%
11%
11%

25%
17%
17%

1,583
1,161
58
91,570

252
415
85
21,430

722
403
59
42,720

454
442
76
34,290

14
14

120
120

198
198
54
9,485

330
330
53
13,730

578
578
50
24,772

13,124
8,460

13,376
10,850

14,098
13,550

14,552
14,540

6,107
164

FY15
27,099
20,347
6,753
549
1,629
0
4,575
143
4,718
204
4,514
623
3,892
2,964

318
468
742
33
39
159
Source: Company, MOSL

18

Inox Wind

Risks and concerns


Capital-intensive nature of the industry
The WTG business in India requires high working capital; this is evident from the fact
that setting up a 1MW wind farm typically requires INR40m of working capital.

Change in regulatory policies


In the past, withdrawal of accelerated depreciation (AD) and generation-based
incentives (GBI) led to a sharp decline in wind energy capacity addition. Any such
adverse policy changes in future can impact the business.

Non-availability of grid connectivity


Inadequate grid infrastructure is another key issue that needs to be addressed
urgently. Across most states with significant wind potential, the grid does not have
sufficient spare capacity to evacuate ever-increasing amount of wind power. The
state distribution utilities are, therefore, reluctant to accept more wind power
generation and tend to prefer thermal power generation.

SEBs weak financial health might impact wind power demand


State electricity boards (SEBs) and government distribution companies own nearly
95% of the distribution network. According to Power Finance Corporation,
aggregate SEB losses in 2011-12 were around INR63.5b and are projected to reach
INR116b by 2014-15. The cost of generating wind power at Rs3.7-6/kWh is relatively
high compared with predominantly coal-based conventional power (Rs3.5/kWh).
SEBs weak financial condition might deter them from purchasing expensive wind
power and thus impact wind power demand in future.

264

225

271

211

206

221

226

239

319

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

752

645

1,051

230
FY99

FY13

200
FY98

1,024

140
FY97

FY12

113
FY96

FY11

88
FY95

FY10

61
FY94

537

51
FY93

FY09

46
FY92

Exhibit 29: Commercial losses up sizably from FY08 (INR b)

Source: Company, MOSL

Non-availability of land can act as a deterrent for WTG industry


The wind energy business is land intensive2MW of turbines require 40 acres of
land, of which actual used is 2.5 acres. To achieve annual capacity addition of 4GW,
the industry would require ~80,000 acres of land every year. However, this wont be
easy as land availability for wind farms is a contentious issue in most states. Even for
the available privately-owned land, change of land use status from agricultural to
non-agricultural is time-consuming. Further, one needs clearances from authorities
if the land is in proximity to a protected area or forest; this is again time-consuming.
1 July 2015

19

Inox Wind

Competitive intensity
The WISE Report estimates the aggregate WTG manufacturing capacity in India at
12GW as of August 2014 and expects the Indian wind power market to witness
annual installations of 3-5GW over the coming years. There exists intense
competition in the WTG segment. In the last few months, Suzlon has taken several
steps to put its house in order by selling stakes in non-core business, inducting a
strategic partner and refocusing on the Indian market. Suzlon has historically been
the market leader with ~50% market share. Post its recent restructuring and
liquidity infusion, it will again attempt to achieve its earlier market share.
Exhibit 30: Top Five players command 87% of market in FY15
100.0%

Vestas

RRB

Wind World

Suzlon

Regen

Inox

Others

Gamesa

80.0%
60.0%
40.0%
20.0%
0.0%
Mar-11

Mar-12

Mar-13

Mar-14

Mar-15
Source: MOSL, Company

RPO compliance might remain weak


Under the Renewable Purchase Obligation (RPO), state electricity regulatory
commissions (SERCs) are obligated by law to buy a certain percentage of electricity
from renewable energy sources. The guidelines issued in 2010 by Central Electricity
Regulatory Commission (CERC) recommended a standardized RPO target of 5% in
every state, with linear increase of 1% annually till 2020 to achieve the NAPCC target
of 15%. However, many SEBs are actually not complying with the renewable
portfolio obligationsgiven their poor financial healthand a few SERCs have also
lowered the non-solar RPO obligation owing to the difficulty of the states in meeting
the earlier targets. SERCs specify targets for respective states based on the
renewable energy potential.
Exhibit 31: State-wise RPO Compliance data

TN
Karnataka
Rajasthan
Gujarat
Maharashtra
Andhra Pradesh
Uttar Pradesh
Madhya Pradesh
Punjab

FY13
9.0%
6.4%
7.0%
7.8%
4.8%
3.4%
2.8%

RPO Target
FY14
9.0%
7.0%
7.0%
8.5%
4.8%
5.0%
4.7%
3.4%

Achieved
FY15
10.0%
17.0%
10.0%
14.0%
7.5%
10.0%
8.0%
7.5%
8.5%
8.5%
4.8%
5.0%
5.5%
2.0%
6.0%
3.0%
3.8%
1.5%
Source: MOSL, Industry Data

No provisioning for warranties


INXW provides its customers warranties against defective components and
workmanship during the defect liability period, which is generally two years. For any
failure due to defective supply or workmanship, INXW undertakes free repair or
replacement. Also, claims for damages brought by third parties could be substantial
and could have material adverse effect on the company.
1 July 2015

20

Inox Wind

Company background
Inox Wind (INXW), an Inox Group company, is Indias fourth-largest wind turbine
generator (WTG) manufacturer, with a market share of 7% in FY14. INXW
commenced operations in March 2010, and manufactures key components of WTGs
nacelles, hubs, rotor blade sets, and towers. It provides turnkey solutions for wind
farm projects through its wholly-owned subsidiaries, and has a project site pipeline
of 4GW. Order book as at December 2014 stood at 1,258MW, and cumulative
installations/supplies stood at 1,044MW (including 312MW yet to be erected).
INXW manufactures two different WTG models with 2MW rating:
n Rotor diameter of 93 meters with hub height of 80 meters
n Rotor diameter of 100 meters with hub height of 80 / 92 meters
INXW has a 100% subsidiary, Inox Wind Infrastructure Services, which does project
development in respect of wind power projects, including wind studies, energy
assessments, land acquisition, site infrastructure development, power evacuation,
statutory approvals, erection and commissioning, and long-term operation and
maintenance (O&M) of wind farms.
About Inox Group: The Inox Group commenced operations in 1923 and currently
operates in industrial gases, engineering plastics, refrigerants, chemicals, cryogenic
engineering, renewable energy and entertainment sectors. The Group has two
publicly-listed companies Gujarat Fluorochemicals and Inox Leisure. The Group
employs over 8,000 people at more than 100 business units in India.
Exhibit 32: Existing and upcoming manufacturing facilities of Inox wind

Source: MOSL, Company

1 July 2015

21

Inox Wind

Board of directors
Mr Deepak Asher, Non-Executive Director
Mr Deepak Asher, aged 56 years, is a Non-Executive Director. He has a bachelors
degree in Commerce and a bachelors degree in Law from Maharaja Sayajirao
University, Baroda. He is a fellow member of the Institute of Chartered Accountants
of India and is also an associate member of the Institute of Cost and Works
Accountants of India. He has been associated with the Inox Group for over 25 years.
He is the founder President of the Multiplex Association of India and was awarded
the Theatre World Newsmaker of the Year Award in the year 2002 for his
contribution to the cinema exhibition industry. He has been instrumental in Inox
Groups diversification into the cinema, CDM and wind energy businesses.

Mr Devansh Jain, Whole time Director


Mr Devansh Jain, aged 28 years, is a Whole time Director. He has completed a
double major degree in Economics and Business Administration from Carnegie
Mellon University, Pittsburgh, USA. He has over six years of work experience in
various management positions. He has been spearheading Inox Groups foray into
the wind energy sector. He is on the National Council of Indian Wind Power
Association and is Honorary Secretary of Indian Wind Turbine Manufacturers
Association. Mr Jain has been instrumental in setting up manufacturing plants in
Himachal Pradesh and in Gujarat, with technology sourced from AMSC. He has been
awarded the Wind Power Man of the Year 2012-13 for development of integrated
wind power supply chain and project development capacity in the country by
Renewable World.

Mr Siddharth Jain, Non-Executive Director


Mr Siddharth Jain, aged 36 years, is a Non-Executive Director. He has completed his
bachelors degree in Mechanical Engineering from the University of Michigan Ann
Arbor, USA and holds a Masters degree in Business Administration from INSEAD,
France. He has over ten years of work experience in various management positions
in the Inox Group and is currently looking after new project developments at Inox
Air Products Limited.

Mr Rajeev Gupta, Whole time Director


Mr Rajeev Gupta, aged 56 years, is a Whole time Director. He holds a bachelors
degree in Chemical Engineering from the Indian Institute of Technology, Delhi and
has over 32 years experience in corporate planning, business and project
development, project management, sales, procurement and operations in
international and domestic industries. He was involved in setting up GFLs chemical
complex at Dahej and production plants for Aditya Birla group, TOA Group of
Companies, a Thai group and Lurgi India Private Limited, subsidiary of Lurgi AG, a
German engineering company. He has more than five years experience in the wind
industry in various capacities.

1 July 2015

22

Inox Wind

Mr Chandra Prakash Jain, Independent Director


Mr Chandra Prakash Jain, aged 69 years, is an Independent Director. He holds a
bachelors degree in Commerce from Rajasthan University and a bachelors degree
in Law from Agra University. He is a fellow member of the Institute of Chartered
Accountants of India. He is former Chairman and Managing Director of NTPC
Limited. He was also the Chairman of the Standing Conference of Public Enterprises
(SCOPE) for the period 2003-05. He has been a past member of the Standing
Technical Advisory Committee of the Reserve Bank of India, Audit Advisory Board of
the Comptroller & Auditor General of India. He has headed the CIIs National
Committee on Energy. Presently, he is also an Independent Director on the boards
of IL&FS Energy Development Company Limited, Adani Power Limited and PCI
Limited. He is also a Member on the Advisory Board of Axis Infrastructure Fund.

Mr Shanti Prashad Jain, Independent Director


Mr Shanti Prasad Jain, aged 75 years, is an Independent Director. He is a fellow
member of the Institute of Chartered Accountants of India and has more than four
decades of experience as a Chartered Accountant and Direct Tax Consultant. Mr Jain
Senior Partner at Shanti Prashad & Co., Chartered Accountants, New Delhi.

Dr S Rama Iyer, Independent Director


Dr S Rama Iyer aged 75 years, is an Independent Director. He is a Chemical Engineer
from Jadhavpur University and received a masters degree and his PhD from Indian
Institute of Technology, Mumbai. He has also participated in the Senior Executive
Program of London Business School, United Kingdom. He has over five decades of
experience in Design Engineering, Project and Enterprise management in the
Chemicals, Petrochemicals and Oil & Gas industries as a member of the Indian
Institute of Chemical Engineers. He received the Distinguished Alumnus Award
from Indian Institute of Technology, Mumbai in 1996. He has been awarded the
Achiever of the Year Award by the Chemtech Foundation in the year 2003 and the
Business Leader of the Year Award by the Chemtech Foundation in the year 2005.

Ms Bindu Saxena, Independent Director


Ms Bindu Saxena aged 56 years, is an Independent Director. She is an Advocate and
a Partner at the law firm, Swarup & Company, Advocates, New Delhi. She has
completed her bachelors in Commerce and in Law from Lucknow University. She
has over 25 years of experience as Corporate Attorney, with experience of
commercial transactions and projects in India and overseas.

1 July 2015

23

Inox Wind

Operating metrics
INR m
Closing order book (MW)
Y-o-Y growth
Order inflow (MW)
Y-o-Y growth
Execution (MW)
Y-o-Y growth

FY13

FY14
370

198
198

FY16E
1,384
17.5%
1,031
-11.3%
825
42.7%

FY17E
1,622
17.2%
1,188
15.2%
950
15.2%

Realizations (INR M/MW)


WTG
OMS

48
7

42
12

43
8

45
11

48
12

Cumulative Installed (MW)

318

468

742

1,516

2,428

10,589
9,485
1,010
94

15,668
13,730
1,756
182

26,940
24,772
2,093
75

46,098
37,130
8,883
85

56,352
45,125
11,133
94

48.0%
44.8%
73.8%
92.8%

71.9%
80.4%
19.2%
-58.8%

71.1%
49.9%
324.3%
13.3%

22.2%
21.5%
25.3%
10.0%

Revenues
WTG
Sale of services
other operating income
Revenues, % YoY
WTG
Sale of services
Other operating income
EBIDTA %

18.6%

11.2%

17.0%

18.8%

20.1%

Net Debt (INR m)

2,743

4,469

2,079

4,058

(1,709)

148
3
145

161
3
158

196
0
196

165
0
165

148
0
148

Core NWC (Days)


Customer Advances
Reported NWC (Days)

1 July 2015

630
218.2%
330
66.7%

FY15
1,178
218.4%
1,162
84.4%
578
75.2%

24

Inox Wind

Financials and valuations


Income Statement
Y/E March
Total Revenues
Change (%)
Raw Materials
Staff Cost
Other Expenses
EBITDA
% of Total Revenues
Other Income
Depreciation
Interest
Exceptional Items
PBT
Tax
Rate (%)
Adjusted PAT
Reported PAT
Change (%)
Adj. Consolidated PAT
Change (%)

1 July 2015

2013
10,589
7,731
250
644
1,965
18.6
48
89
388
1,536
33
2.1
1,503
1,503
1,503

2014
15,668
48.0
12,131
384
1,407
1,745
11.1
91
116
460
15
1,245
- 45
-3.6
1,290
1,290
(14.2)
1,322
(12.0)

2015
27,099
73.0
20,347
549
1,629
4,574
16.9
143
204
623
0
3,891
927
23.8
2,964
2,964
129.9
2,964
124.2

2016E
46,098
70.1
33,651
791
2,996
8,659
18.8
157
280
575
7,962
1,911
24.0
6,051
6,051
104.1
6,051
104.1

(INR Million)
2017E
56,352
22.2
40,573
1,044
3,381
11,354
20.1
173
350
613
10,564
2,535
24.0
8,029
8,029
32.7
8,029
32.7
(INR Million)
2017E
2219
26,107
28,326
6,500
209
35,035

Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Minority Interest
Loans
Deferred Tax Liability
Capital Employed

2013
400
2,555
2,955
3,769
195
6,919

2014
2000
2,278
4,278
5,582
151
10,011

2015
2219
12,151
14,370
9,200
209
23,779

2016E
2219
18,078
20,297
5,750
209
26,257

Gross Fixed Assets


Less: Depreciation
Net Fixed Assets
Capital WIP
Investments
Goodwill
Curr. Assets
Inventory
Debtors
Cash & Bank Balance
Loans & Advances
Other Current Assets
Current Liab. & Prov.
Creditors
Other Liabilities
Net Current Assets
Application of Funds

1,772
206
1,566
41
0.02
7,895
795
5,002
15
1,964
119
2,582
2,278
304
5,313
6,919

2,040
317
1,722
255
450.02
16
12,354
2,707
7,096
73
2,030
449
4,788
4,217
571
7,567
10,011

2,294
423
1,872
202
0.50
0
28,667
1,265
13,210
7,120
6,720
352
6,962
5,662
1,300
21,704
23,779

4,044
608
3,437
300
34,301
1,894
18,944
1,692
11,367
404
11,781
10,104
1,677
22,520
26,257

4,544
816
3,728
300
46,154
2,316
21,614
8,209
13,586
429
15,147
13,123
2,024
31,007
35,035

25

Inox Wind

Financials and valuations


Ratios
Y/E March
Basic (INR)
Adj EPS
Cash EPS
Book Value

1 July 2015

2013

2014

2015

2016E

2017E

37.6
39.8
73.9

6.6
7.2
21.4

13.4
14.3
64.8

27.3
28.5
91.5

36.2
37.8
127.6

Valuation (x)
P/E
EV/EBITDA
EV/Sales
Price/Book Value

11.3
10.6
2.0
5.7

64.2
51.3
5.8
19.9

31.8
21.1
3.6
6.6

15.6
11.4
2.1
4.6

11.7
8.2
1.6
3.3

Profitability Ratios (%)


RoE
RoCE

50.9
28.6

30.9
17.6

20.6
19.2

29.8
32.8

28.3
32.1

Turnover Ratios
Debtors (Days)
Inventory (Days)
Creditors. (Days)
Asset Turnover (x)

172
27
79
1.5

165
63
98
1.6

178
17
76
1.1

150
15
80
1.8

140
15
85
1.6

Leverage Ratio
Debt/Equity (x)

1.3

1.3

0.6

0.3

0.2

Cash Flow Statement


Y/E March
PBT before EO Items
Add : Depreciation
Interest
Less : Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
EO Income
CF from Oper. Incl. EO Items

2013
1,536
89
314
287
(2,862)
(1,210)
(1,210)

2014
1,293
116
460
334
(2,389)
(854)
15
(870)

2015
3,891
204
623
927
(7,091)
- 3,300
0
(3,300)

2016E
7,962
280
575
1,911
(6,244)
662
662

(Inc)/Dec in FA
Investment in liquid assets
CF from Investments

(1,358)
(0)
(1,358)

(498)
64
(434)

(186)
450
264

(1,848)
1
(1,847)

(500)
(500)

(Inc)/Dec in Debt
Less : Interest Paid
Dividend Paid
CF from Fin. Activity

2,565
375
0
2,193

1,789
460
0
1,361

10,635
623
10,084

(3,450)
575
(4,243)

750
613
(5)

Inc/Dec of Cash
Add: Beginning Balance
Closing Balance

(375)
390
15

58
15
73

7,047
73
7,120

(5,428)
7,120
1,692

6,517
1,692
8,208

(INR Million)
2017E
10,564
350
613
2,535
(1,970)
7,021
7,021

26

Inox Wind

NOTES

1 July 2015

27

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Inox Wind

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28