Indowind Energy is entering the capital market on 21st August 2007, with a public issue of 1.25 crore equity shares of Rs.10 each, in the band of Rs.55 to Rs.65 per share.
The company is into wind power energy generation as also providing operations and maintenance (O&M) to wind power generators. The company owns 16.825 MW wind power generation capacity of its own and 17.915 MW for others, on an Operate and Maintain (O&M) basis. Despite this, the financial performance of the company is nothing great to talk about.
For year ended June 07, the company had total income of Rs.27.57 crores with PBT of Rs.6.67 crores and PAT of Rs.6.58 crores. It is very strange to see that the company has tax liability of just Rs.28.30 lakh for this year, inspite of the company having a misc. income of Rs.300.16 lakhs. For the year, power segment had profit of Rs.1.11 crores on an income of Rs.7.72 crores and on assets of Rs.57.47 crores. Project division had income of Rs.16.40 crores with profit of Rs.3.86 crores on total assets of Rs.18.26 crores while others had income of Rs.3.45 crores and profit of Rs.2.92 crores. This is mainly on account of misc. income of Rs.300.16 lakhs and financial income of Rs.45.19 lakhs.
The results analysis reveals that, the higher the value of assets, lower is the bottomline of the division. To make its bottomline look healthy, the company had income in different heads in different years, which are purely unrelated to the nature of business. In FY 03, financial income was Rs.8.62 crore, trading income was of Rs.1.48 crores in FY 04 while Rs.1.68 crore in FY 06.
Apart from this, the company has a long list of litigations against finance companies as also against its O&M clients. Even the promoters of the company, Subuthi Finance Ltd. has long list of violations and have received 23 show-cause notices from BSE. Also, this company has not been able to keep to its projections.
The company is now carrying out an expansion of Rs.97.54 crores, mainly to set up 9 MW wind farm in Karnataka and to purchase second hand wind energy generators from banks. When the company was unable to run its own power projects, how would they be able to run defective power projects by acquiring them from banks, which have been lying closed? Maybe the public money will turn it profitable?
The present equity of the company is Rs.36.46 crores, which would rise to Rs.48.96 crores. Present EPS of Re.1.80 does not justify such a steep valuation. Present topline of the company is lower than its equity base. The bottomline of the company is largely inflated from non-related income. The promoters have no compliance discipline.
All these, reflects badly on the promoters. Even fundamentally, the share has no justification of a price band of Rs.55 to 65. Probably, even half of this, would have attracted debate on valuations.