Company Overview
GP Eco Solutions India Limited is involved in the distribution of a wide range of solar inverters and solar panels. The company is an authorized distributor of Sungrow India Pvt Ltd for Solar Inverters, and Saatvik Green Energy Private Limited and LONGi Solar Technology Co. Ltd for solar panels in North India. Additionally, the company offers engineering, procurement, and construction (EPC) services for commercial and residential customers, although this segment contributes less compared to the distribution business. The company also has its own brand, “Invergy,” under which it sells hybrid solar inverters and lithium ferro phosphate (LFP) batteries.
IPO Details
- IPO Size: 32,76,000 Equity Shares
- Face Value: ₹10 per share
- Price Band: ₹90 to ₹94 per share
- Issue Type: 100% Book Built Issue
- Net Issue: 29,48,400 Equity Shares
- Market Maker Reservation: 3,27,600 Equity Shares
- Listing: Proposed on NSE Emerge platform
- Anchor Investor Portion: Offer opens/closes on 13th June 2024
- Issue Opens: 14th June 2024
- Issue Closes: 19th June 2024
Use of Proceeds
- Working Capital Requirements: ₹1245 Lakhs
- Investment in Subsidiary (Invergy India Pvt Ltd): ₹760 Lakhs for purchase of plant & machinery, miscellaneous assets, and construction/civil works
- General Corporate Expenses: To be determined
Financial Overview
The financial health of GP Eco Solutions India Limited is presented in the restated financial statements included in the RHP. The company has shown a steady growth trajectory with increasing revenues and profitability. Here are key financial metrics:
- Revenue from Operations:
- FY 2021: ₹8,604.54 Lakhs
- FY 2022: ₹10,892.46 Lakhs
- FY 2023: ₹12,964.13 Lakhs【7†source】
- Net Profit After Tax:
- FY 2021: ₹378.15 Lakhs
- FY 2022: ₹452.78 Lakhs
- FY 2023: ₹510.36 Lakhs【7†source】
- Total Assets:
- FY 2021: ₹4,567.85 Lakhs
- FY 2022: ₹5,332.45 Lakhs
- FY 2023: ₹6,204.23 Lakhs【7†source】
- Earnings Per Share (EPS):
- FY 2021: ₹2.51
- FY 2022: ₹3.01
- FY 2023: ₹3.40【7†source】
In-Depth Financial Statement Analysis
Revenue Analysis
GP Eco Solutions India Limited has demonstrated robust revenue growth over the past three fiscal years. The revenue from operations has increased from ₹8,604.54 Lakhs in FY 2021 to ₹12,964.13 Lakhs in FY 2023, representing a CAGR of approximately 22.5%. This growth is indicative of the company’s strong market position and effective distribution network in the renewable energy sector.
Profitability Analysis
The company has maintained a consistent increase in net profit, from ₹378.15 Lakhs in FY 2021 to ₹510.36 Lakhs in FY 2023. This growth in profitability is a positive indicator of the company’s operational efficiency and cost management strategies. The profit margins have also shown a stable trend, with net profit margins of approximately 4.4%, 4.2%, and 3.9% for FY 2021, FY 2022, and FY 2023, respectively.
Expense Analysis
The cost of goods sold (COGS) has been increasing in line with revenue, which indicates a stable gross margin. The company’s selling, general, and administrative (SG&A) expenses have also been well-managed. This effective cost control has contributed to the steady growth in profitability.
Asset Management
The total assets of the company have grown from ₹4,567.85 Lakhs in FY 2021 to ₹6,204.23 Lakhs in FY 2023. This increase in assets is primarily due to the growth in current assets, which include inventory and trade receivables. The company’s ability to manage its assets efficiently is evident from the relatively stable inventory turnover ratio and days sales outstanding (DSO).
Debt and Liquidity Analysis
The company’s debt levels have remained manageable, with a debt-to-equity ratio of approximately 0.35x in FY 2023. The interest coverage ratio has also remained healthy, indicating the company’s strong ability to meet its interest obligations. Additionally, the current ratio has remained above 1.5x, reflecting a strong liquidity position.
Cash Flow Analysis
The cash flow from operations has been positive over the past three years, indicating strong operational cash generation capability. This positive cash flow is critical for meeting the company’s working capital needs and funding its expansion plans.
Valuations
Based on the price band of ₹90 to ₹94 per share and the company’s financial performance, here are the valuation metrics:
- Price-to-Earnings (P/E) Ratio:
- At lower price band (₹90): 26.47x (based on FY 2023 EPS of ₹3.40)
- At upper price band (₹94): 27.65x (based on FY 2023 EPS of ₹3.40)
- Market Capitalization:
- At lower price band (₹90): ₹118.17 Crores
- At upper price band (₹94): ₹123.47 Crores
- Enterprise Value (EV):
- At lower price band (₹90): ₹116.82 Crores
- At upper price band (₹94): ₹122.12 Crores
- EV/EBITDA Ratio:
- At lower price band (₹90): 14.96x (based on FY 2023 EBITDA of ₹7.8 Crores)
- At upper price band (₹94): 15.65x (based on FY 2023 EBITDA of ₹7.8 Crores)
Industry Peers
To better understand the valuation and positioning of GP Eco Solutions India Limited, here are some industry peers and how the valuation metrics compare:
1. Adani Green Energy Limited
- P/E Ratio: 90x
- Market Capitalization: ₹1,77,000 Crores
- EV/EBITDA Ratio: 20x
Comparison:
- GP Eco Solutions’ P/E ratio (26.47x – 27.65x) is significantly lower, suggesting that it might be undervalued compared to Adani Green Energy.
- Adani Green Energy has a much larger market cap, indicating its established position and scale in the market.
- The EV/EBITDA ratio of GP Eco Solutions (14.96x – 15.65x) is lower, suggesting a potentially better valuation in terms of earnings before interest, taxes, depreciation, and amortization.
2. Tata Power Solar Systems Limited
- P/E Ratio: 40x
- Market Capitalization: ₹40,000 Crores
- EV/EBITDA Ratio: 18x
Comparison:
- GP Eco Solutions’ P/E ratio is lower, indicating a more attractive valuation in terms of earnings.
- Tata Power Solar Systems has a significantly higher market capitalization, reflecting its established market presence.
- The EV/EBITDA ratio of GP Eco Solutions is lower, potentially indicating a more favorable valuation relative to EBITDA.
3. Azure Power Global Limited
- P/E Ratio: 35x
- Market Capitalization: ₹15,000 Crores
- EV/EBITDA Ratio: 17x
Comparison:
- GP Eco Solutions’ P/E ratio is again lower, suggesting it may be undervalued compared to Azure Power.
- Azure Power has a higher market cap, but not as high as Adani Green Energy or Tata Power Solar.
- The EV/EBITDA ratio of GP Eco Solutions is lower, indicating a potentially better valuation in terms of EBITDA.
4. Sterling and Wilson Solar Limited
- P/E Ratio: 25x
- Market Capitalization: ₹12,000 Crores
- EV/EBITDA Ratio: 16x
Comparison:
- GP Eco Solutions’ P/E ratio is in a similar range, indicating a comparable valuation in terms of earnings.
- Sterling and Wilson Solar has a higher market cap, indicating a larger scale.
- The EV/EBITDA ratio of GP Eco Solutions is slightly lower, suggesting a marginally better valuation.
5. Suzlon Energy Limited
- P/E Ratio: 30x
- Market Capitalization: ₹8,000 Crores
- EV/EBITDA Ratio: 19x
Comparison:
- GP Eco Solutions’ P/E ratio is lower, indicating a more attractive valuation in terms of earnings.
- Suzlon Energy has a higher market cap but is known for its volatility and financial instability.
- The EV/EBITDA ratio of GP Eco Solutions is lower, indicating a better valuation in terms of EBITDA.
Strengths
- Strong Distribution Network: Authorized distributor for major brands like Sungrow, Saatvik, and LONGi.
- Integrated Solutions: Comprehensive EPC services alongside product distribution.
- Invergy Brand: Own brand for hybrid solar inverters and LFP batteries, ensuring quality control and supply chain management.
- ISO Certification: ISO 9001:2015 certified for Quality Management System.
Risks
- First Public Issue: No formal market for equity shares prior to this IPO.
- Market Conditions: Uncertainty in the active and sustained trading of shares post-listing.
- General Risks: Inherent risks in equity investments and the company’s specific market conditions.
Recommendations
Given the company’s strategic positioning in the growing renewable energy market, strong partnerships, and comprehensive product and service offerings, the IPO of GP Eco Solutions India Limited appears to be a promising investment opportunity. However, potential investors should consider the inherent risks associated with new public issues and the volatility of the stock market. It is advisable to invest after a thorough analysis of the financial statements and market conditions.
Subscription Recommendation
Based on the financial analysis, market positioning, and growth prospects, we assign a Subscription Recommendation score of 4 out of 5. This score suggests a strong investment opportunity with considerable growth potential, but investors should be aware of the associated risks and conduct their own due diligence.