Inox Green Energy Services Limited(IGESL) is one of the major wind power operation and maintenance (O&M) service providers within India which was incorporated in 2012. The company is engaged in the business of providing long-term O&M services for wind projects, specifically the provision of O&M services for wind turbine generators (WTGs) and the common infrastructure facilities such as pooling stations and transmission lines which support power evacuation from such WTGs. It has an aggregate of 2,792 MW (megawatt) of wind projects spread across eight wind-resource rich states in India with an average remaining project life of more than 20 years. Further, they are a subsidiary of InoxWindLimited(IWL)with whom they enjoy a synergistic relationship.

ABOUT THE COMPANY – Inox Green Energy Services Limited

As on 30th June 2022, Inox Green Energy Service Limited portfolio of O&M contracts (consisting of both comprehensive O&M contracts and common infrastructure O&M contracts) covered an aggregate of 2,792 MW (megawatt) of wind projects spread across eight wind- resource rich states in India with an average remaining project life of more than 20 years.
The company enter into long-term O&M contracts with their customers which range from 5 to 20 years (in which the first two to three years of O&M services are generally provided for free for IWL supplied WTGs) with a renewal option provided in most cases. Such contracts provide them with full revenue visibility as the price for their O&M services is pre-determined for each year of the contract. Furthermore, such contracts feature a built-in fixed price escalation formula of approximately 5% per annum (compounded on the previous year’s charges for a contractually specified number of years) which provides both their customers and them with price certainty and guarantees them a level of steady growth and inflation protection.
The operating portfolio of O&M contracts had grown at a CAGR of ~40.16% in the past nine years since the commencement of operations.

The company has a diversified customer base, some of whom they had enjoyed business relationships with between five and nine years, comprising private companies, independent wind power producers, power utilities and government organizations in India, to whom they provide wind farm O&M services.
Their customers comprise large independent power producers (IPPs), public sector undertakings (PSUs) and retail customers, such as Gujarat Fluorochemicals Limited, Continuum Power Trading (TN) Private Limited, Gujarat Industries Power Company Limited, Torrent Power Limited, Shree Cement Ltd., etc.
IGESL’s subsidiaries are engaged in the business of power generation through renewable sources of energy with Nani Virani Wind Energy Private Limited being the only subsidiary which has commenced power generation till date.
In addition to growing the company’s portfolio through the entry of new long-term O&M contracts with customers who purchase IWL’s WTGs, they plan to expand their portfolio to also provide O&M services for WTGs which are not manufactured by IWL.

Classifications of services are as follows:

They have a dedicated onsite O&M team to provide 24/7 operation services for their customers’ wind farms to help ensure that their WTGs are generating the highest yield possible under prevailing weather conditions.
The team operates the wind power plant’s infrastructure (which includes the WTGs) and the power evacuation facilities.
In particular, the company is able to monitor and control the WTGs in real time through the use of wtSCADA.

The maintenance of WTGs (i.e., WTG O&M) is generally categorized into predictive and reactive maintenance.
In reactive maintenance, repairs are undertaken once a component fails and often results in long downtimes for the affected WTG. In predictive maintenance, efforts are taken to detect potential component failures in advance so as to be able to resolve any issues early and minimize such downtime.
The company focuses on predictive maintenance through the scheduling of regular inspections and maintenance (which are enhanced during peak wind seasons) as well as employing advanced tools such as wtSCADA.

INOX WIND LIMITED

The company enjoys synergistic benefits as a subsidiary of InoxWindLimited (IWL), which is principally engaged in the business of manufacturing WTGs and providing turnkey solutions by supplying WTGs and offering a variety of services including wind resource assessment, site acquisition, infrastructure development, EPC of WTGs, and, through IGESL, providing long-term O&M services for wind power projects.
Pursuant to an exclusivity agreement between IWL and IGESL, they provide exclusive O&M services for all WTGs sold by IWL through the entry of long-term O&M contracts between the WTG purchaser and themselves for terms which typically range between 5 to 20 years. Due to this exclusivity agreement, IWL’s order book is an important indicator of future revenue and growth for their company. As of June 30, 2022, IWL had entered into binding contracts for the supply of 2 MW capacity WTGs with an aggregate capacity of 964 MW. Further, IWL had also received letters of intent, which are non-binding and which therefore may not lead to execution of any form of binding contract, for its new3.3 MW capacity WTGs with an aggregate capacity of 524.7 MW.

SECTOR OUTLOOK – Inox Green Energy Services Limited

India is one of the fastest growing economies in the world with power demand expected to grow post a slump in FY21 owing to the Covid-19 pandemic. Demand is expected to be met with an increased focus on the renewable energy sector including wind power. The provision of O&M services for wind energy in India is dominated by original equipment manufacturers and with wind capacity addition forecasted to be in the range of 17-20 GW within FY23-FY27, the demand for O&M services is expected to grow to ₹170-210 billion by fiscal 2026.
The total installed generation capacity in India at the end of July 2022 was 404 GW, of which ~97 GW of capacity was added from FY16 onwards. Coal and lignite-based installed power generation capacity has maintained its dominant position over the years and accounts for ~52% as of July 2022. However, renewable energy installations (including large hydroelectric projects) have reached approximately 161 GW capacity as on July 2022, compared with 25 GW as on March 2012 (Source: MNRE), constituting approximately 40% of total installed generation capacity as of date. In particular, this growth has been led by solar power, which grew at breakneck speed to approximately 58 GW from 0.9 GW over the same period.

CRISIL Research expects 100-110 GW of renewable power generation capacities to be added between FY23-FY27. The capacity additions in the renewable energy segment are expected to witness robust growth. CRISIL research expects the wind capacity addition to be in the range of 17-20 GW over FY23-FY27, thereby taking the total installed capacity over 50 GW. The growth is likely to be on account of hybrid capacity allocation along with an existing pipeline of 10-11 GW for pure play wind.
The share of private sector in overall power sector investments during FY23 to FY27 is expected to increase to 39% as against 30% over the past five years. This can be attributed to large renewable capacity additions, which are majorly financed by private investors. The share of central sector would decrease marginally to 24% over FY23 to FY27, as compared to 26% over the previous five years. Despite there being a growth in investment in absolute terms, share of central investments will decline due to doubling of private investments and increase in state investments due to (Revamped Distribution Sector Scheme) RDSS. State sector’s share will account of more than 35% of power investments, led by RDSS, along with moderate investments in the generation segment.

OBJECTS OF THE OFFER

The net proceeds of the Fresh Issue will be utilized in the following manner:

Repayment/pre-payment, in full or part, of certain borrowings availed by the company including redemption of Secured NCDs in full and
General corporate purposes.

RISK FACTORS – Inox Green Energy Services Limited

The company is currently entirely dependent on Inox Wind Limited, the promoter for their business and if they were to choose another service provider for operation and maintenance services of their wind turbine generators, their business, financial condition and prospects may be adversely affected.
There is also a risk that their customers may not renew their service contracts or that renewal terms may be less favorable to them than their current contracts with them or that competition from other service providers may negatively impact the prices at which they can successfully contract for their services.
Orders in their Promoter, Inox Wind Limited’s order book may be delayed, modified or cancelled, and letters of intent may be withdrawn or may not translate to confirmed orders.
There are outstanding legal proceedings involving their Company, Subsidiaries, Directors, Promoter and their Group Companies.
As on 30th June 2022, they have a contingent liabilities worth of ₹236.8 crore, which if materialize, may adversely affect their financial condition, cash flows and results of operations.
The company had entered into business transfer agreement by which they had divested their erection, procurement and commissioning (EPC) business to one of the subsidiaries of their Promoter, Resco Global Wind Services Private Limited (“BTA”), which imposes certain contractual obligations on the company.

PROMOTER BACKGROUND AND SHAREHOLDING – Inox Green Energy Service Limited

The company was originally incorporated as ‘Inox Wind Infrastructure Services Limited’ at Vadodara on 11th May 2012. The company was promoted by Inox Wind Ltd (“IWL”), who in aggregate together with its nominee, holds 22,05,31,701 equity shares, representing 93.84% of the pre- offer issued, subscribed, and paid-up equity share capital of the company.
IWL is the only promoter of the company, which is the parent company of IGESL.

STATEMENT OF PROFIT AND LOSS – Inox Green Energy Services Limited

STATEMENT OF ASSETS AND LIABILITIES – Inox Green Energy Services Limited

STATEMENT OF CASH FLOW – Inox Green Energy Services Limited

KEY METRICS – Inox Green Energy Services Limited

SWOT ANALYSIS – Inox Green Energy Services Limited

The company is currently entirely dependent on Inox Wind Limited for their business, therefore, any delay or cancellation could have a material adverse effect on the business, results of operations and financial condition.
The renewal rate of service contracts may decrease in the future and customers may move from comprehensive O&M contracts to common infrastructure O&M contracts.
The company has high borrowings of ~₹910 crore as on 30th June 2022.

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INOX GREEN ENERGY SERVICES LIMITED - IPO