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INSOLATION ENERGY NOTES

Insolation Energy Ltd. specializes in solar module manufacturing and has a current capacity of 700 MW, with plans to expand by an additional 1,000 MW in the next three years. The company faces challenges such as high competition and dependency on a limited customer base, while also benefiting from government initiatives to boost solar energy production in India. Financially, the company shows strong metrics compared to industry leaders, but it has risks related to inventory management and contingent liabilities from government schemes.

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61 views

INSOLATION ENERGY NOTES

Insolation Energy Ltd. specializes in solar module manufacturing and has a current capacity of 700 MW, with plans to expand by an additional 1,000 MW in the next three years. The company faces challenges such as high competition and dependency on a limited customer base, while also benefiting from government initiatives to boost solar energy production in India. Financially, the company shows strong metrics compared to industry leaders, but it has risks related to inventory management and contingent liabilities from government schemes.

Uploaded by

jimmydesi9
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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INSOLATION ENERGY LTD.

Engaged in the business of solar module manufacturing (40Wp to 540 Wp) &
trading of Solar PCU & lead acid batteries

Current Capacity : 700 MW [ 500 MW got added Recently & will be operational by
Dec- 2022) ]

Future plans: 500 MW solar module + 500 MW solar cell capacity (in next 3 yrs)

BUSINESS CHARACTERISTICS:

• Low degree of operating leverage ( as 80-85% of revenue is consumed by


raw material expenses )

Future Estimates by Management

(Sales in FY-22 was 215 crores.)

Sameera Middha (2-Oct-2022)


ORDER BOOK

Key domestic Customers:

• Livguard Energy Technologies Pvt Ltd

• Livfast Batteries Pvt Ltd

• Shakti Pumps India Ltd

• Microtek International P. Ltd

• Zunroof Tech Pvt Ltd

Sameera Middha (2-Oct-2022)


Key Triggers in Solar Module Manufacturing in India

The focus of entire world upon clean energy in order to battle with the global warming
& climate change.

At present, India has 20 GW annual capacity for manufacturing solar modules & 4.5
GW of annual capacity for manufacturing solar cells.

And Govt of India has decided to install 500 GW of renewable energy in India by 2030.
Out of this 280 GW will be procured from solar energy.

Till 30 June 2022; total installed capacity from solar is around 58 GW so we are yet
to install 222 GW of solar energy infrastructure.

So there is a huge demand-supply gap in domestic manufacturing of solar modules for


which govt has been announcing various schemes like PLI of 24000 cr & imposition of
BCD of 40% on import Modules & 25% on import of cells.

Sameera Middha (2-Oct-2022)


INDUSTRY ANALYSIS (From India’s perspective)

Pricing Power of Suppliers : Medium to High

As Indian solar module manufacturers are dependent on China, Vietnam, Malaysia,


Taiwan etc. for its raw materials requirements. And China controls more than 90%
of supply chain of solar modules for the entire world.

Pricing Power of Customers: Low to Medium

Since most of the demand for solar energy will come from govt department so in
order to win these govt tenders, the bidders have to design their contract with
most cost effective system to win over other bidders.

But because there is a huge gap in demand & supply for solar modules so currently
customers has low pricing power.

Intensity of Competition : High

Indian players face competition from both domestic as well as international


players. But going forward only those players will be able to grab the market who
will focus on backward integration.

Threat of new entrants : Medium

Only the time & capital required to set up the manufacturing facility is the entry
barrier.

Threat of Substitutes: Low

Since, India is geographically located at a position where most part of the country
experience at least 300 sunny days. Also, due to its geographic position, other
major sources of renewable energy (wind & hydro) are only feasible in a small part

Sameera Middha (2-Oct-2022)


of the country so they cannot make a substitute for solar in India.Also, the
declining cost of solar energy over the years has supported this transition in India.

FINANCIALS

Checklist

Debt/ Equity = 1.29 (considerable) PASS

Interest Coverage Ratio = 5 PASS

Insolation Energy Vikram Solar Waaree Energies

EBITDA % 6-7% 8-11 % 5-6%

PAT % 3-4% 2% 2-2.5%

RoE 30-40% 10-13% 14-32%


(Networth = 22 cr )
(32% in FY-20)

RoCE 30-40 % 14-15% 15-33%

(Total Capital Employed (33% in FY-20)


= 53 cr)

EBITDA to OCF 50-75% 150% 75-90%

Conclusion : PASS

Reason : Basic Financial Metrics are considerable if we compare them with


Industry Leaders.

Sameera Middha (2-Oct-2022)


POSITIVES :

• Company’s solar module has received quality certificate from BIS.

• Insolation energy is included in the Approved List of Module Manufacturers by


MNRE which means that company’s solar modules are eligible for use in Govt.
projects.

• Only few related party transactions are there.

• Management consists of Mr. Kuldeep Singh Popli who had served as a Chairman
of IREDA & Mr. Akhilesh Kumar Jain who had served as a MD in REIL.

• Company has a dedicated customer service team in Rajasthan and Uttar Pradesh
to resolve issues related to its products and services.

• 40% sales growth in FY-22.

RISKS/ NEGATIVES/ CHALLENGES

• Inventory management is one the challenges for module manufacturers.

• Ensuring the supply of quality product is very important as solar module


manufacturers have to claim a warranty of 25 years for 80% cost.

• Major portion of company’s revenue comes from Top 5 customers who accounts
for around 45-50% of total sales. (Customer Concentration)

• Insolation energy has been taking benefit of EPCG scheme by govt which make
them liable to fulfil certain export obligations. In case company is not able to
fulfil those export obligations by 2024 then company will have to pay a penalty
of 2 cr to Govt. (CONTINGENT LIABILITY)

Sameera Middha (2-Oct-2022)


Contingent Liability

Sameera Middha (2-Oct-2022)


RELATED PARTY TRANSACTIONS

• Siddhartha Sharma (who own 3% stake in company) has given loan of worth 1.44
cr to Insolation Green energy Pvt Ltd (a wholly owned subsidiary of Insolation
Energy)

• Insolation Energy has continuously been selling its products to Fluidcon


Engineers (a distribution & trading company of promoters).

Sameera Middha (2-Oct-2022)


RED FLAGS

• The properties where the registered office and manufacturing facilities of


company are situated in Jaipur and Delhi are not owned by company and the
same have been taken on lease from the promoters; Mr. Manish Gupta and Mr.
Vikas Jain.

The Rent has been increased from 9 lakhs in FY-20 to 36 lakh in FY-21 to 72 lakhs
in FY-22.

Sameera Middha (2-Oct-2022)


• Risun Insolation Solar Energy Pvt Ltd

(a personal company of promoters)

Its office/ plant is situated at same location where the plant of Insolation Energy
Ltd is located. (Although no revenue has been shown from this company)

Sameera Middha (2-Oct-2022)

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