ACME Solar Holdings IPO Review: Should You Buy?

ACME Solar Holdings, a prominent player in India’s renewable energy landscape, is gearing up for its IPO, offering shares for a total of ₹2,900 crores. The IPO opens on November 6, 2024, and will close on November 8, 2024. This post dives into ACME Solar Holdings’ business, strengths, risks, and key IPO details to help you make an informed decision.

ACME Solar Holdings IPO Details

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About ACME Solar Holdings

Founded in 2015, ACME Solar Holdings has established itself as a reliable renewable energy provider in India, with a diversified portfolio across solar, wind, and hybrid projects. The company’s projects are spread over 10 Indian states and generate revenue primarily through long-term Power Purchase Agreements (PPAs) with central and state government entities.

ACME Solar oversees the development, construction, ownership, and operation of renewable energy projects, handling all phases internally, from bidding to commercial operations. Its internal teams manage engineering, procurement, construction (EPC), and operation and maintenance (O&M), ensuring end-to-end control over projects.

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ACME Solar Holdings’ Strengths

1. Diverse Project Portfolio: ACME Solar has a strong footprint across 10 Indian states with operational solar projects amounting to 1,320 MW and an additional 2,220 MW in construction. This includes 1,500 MW in solar, 150 MW in wind, and 570 MW in FDRE.
2. End-to-End Project Management: The company boasts an integrated in-house platform, managing all phases of its projects, from bidding to operation. This integration allows for greater operational efficiency.
3. Technological Advancements: ACME Solar uses advanced technology for project optimization, including SCADA systems, central monitoring, and preventive maintenance software to ensure peak performance.
4. Experienced Team: With an in-house engineering team focused on innovation and a robust maintenance strategy, ACME Solar is well-equipped to manage large-scale renewable energy projects.

ACME Solar Holdings’ Risks

1. High Debt: As of May 2024, ACME Solar has consolidated borrowings of ₹10,314.02 crores. High debt levels pose financial risks, and any inability to service these obligations could impact its operations.
2. Dependence on Key Suppliers: ACME Cleantech, a major supplier of solar PV modules, represents a significant dependency. Any issues with this relationship could affect ACME Solar’s project timelines.
3. Revenue Concentration: The company’s top 10 offtakers contributed over 85% of revenue for the last three fiscal years. Dependency on these few offtakers poses a revenue risk if any of them were to exit or face financial challenges.
4. State Dependency: A majority of ACME’s revenue comes from projects in Andhra Pradesh, Rajasthan, and Telangana. Adverse changes in these states’ policies or business environment could impact revenue and profitability.
5. Project Execution Risks: ACME’s success relies on the timely execution of its contracted projects. Any delays or project issues can lead to penalties or liquidation of performance bank guarantees.

Financial Highlights

Key Financial Metrics (as of June 30, 2024)

Financial Performance (FY22 – FY24)

ACME Solar Holdings IPO Lot Size and Investment

Use of Proceeds

The IPO proceeds will be used for:

1. Repayment/Prepayment of Subsidiaries’ Borrowings: Part of the net proceeds will address debt reduction, which is essential given ACME Solar’s high debt-to-equity ratio.
2. General Corporate Purposes: Remaining funds will support ACME Solar’s business operations, including potential expansions.

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ACME Solar Holdings IPO Review: Should You Apply?

GMPwatch.com Verdict: May Apply

ACME Solar Holdings offers an appealing proposition due to its established footprint in India’s renewable energy sector and its robust project pipeline. However, high leverage, revenue concentration risks, and dependency on key suppliers are notable concerns. This IPO may suit risk-tolerant investors who believe in the long-term potential of India’s renewable energy sector. Given the mixed risk-reward scenario, “May Apply” is a balanced approach for those looking to invest.

ACME Solar Holdings IPO Registrar

• Registrar: KFin Technologies Limited
• Phone: 04067162222, 04079611000
• Email: acmesolar.ipo@kfintech.com
• Website: KFin IPO Status

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