Inox India IPO subscribed 1.8x on Day 1 so far; grey market premium rises sharply

The Rs 1,459.32 crore-initial public offering (IPO) of Inox India saw a strong response from the investors during the first day of the bidding process, particularly by retail and non-institutional investors (NIIs). The issue had kicked-off for bidding on Thursday, December 14.

Gujarat-based Inox India is selling its shares in the price band of Rs 627-660 apiece with a lot size of 22 shares and its multiples thereafter. The three-day bidding for the IPO will close for bidding on Monday, December 18. The issue is entirely an offer-for-sale of up to 22,110,955 equity shares.

According to the data, the investors made bids for 2,75,73,524 equity shares, or 1.78 times, compared to the 1,54,77,670 equity shares offered for the subscription by 3.15 pm on Thursday, December 14. The bidding for the issue will continue for three days.

The allocation for retail investors was subscribed 2.48 times, while the portion reserved for non-institutional investors saw a subscription of 2.52 times. However, the quota set aside for qualified institutional bidders (QIBs) attracted bids for merely 2 per cent as of the same time.

Also read: Inox India IPO opens today: Should you subscribe to the issue?

Founded in 1976, Inox India is a leading provider in the supply of cryogenic equipment, with a primary focus on tanks. The company delivers comprehensive solutions for equipment and systems designed to operate in cryogenic conditions, encompassing services such as design, engineering, manufacturing, and installation.

Last heard, Inox India was commanding a grey market premium of Rs 455-460 per share, signaling an upside of 70 per cent compared to the upper end of the price band. However, the premium in the unofficial market was about Rs 330 before bidding for the issue opened.

The demand for cryogenic equipment across geographies is expected to be driven by the increased demand for cleaner fuels such as LNG and hydrogen due to the focus on reducing carbon emissions from conventional energy and Inox India is well capitalized to capture the global market growth, said Reliance Securities.

"Inox India has increased productivity over the last 3 years improving its exports share, growth through strategic acquisitions and alliances to explore and develop new opportunities in LNG, Hydrogen and Cryo scientific markets. We believe IIL investment in R&D and product development, 4 patent applications, expansion of the new facility in Savli, and strong manufacturing capabilities in large turnkey projects will drive the earnings momentum over the next few years," it added with a 'subscribe' rating.

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Inox India raised Rs 437.8 crore from several anchor investors as it finalised allocation of 66,33,285 equity shares at a price of Rs 660 apiece. The IPO allocates 50 per cent of the offer to qualified institutional bidders (QIBs), with non-institutional investors receiving 15 per cent, and the remaining 35 per cent allocated to retail investors.

Inox India strategically aims to shift its revenue mix gradually, focusing on large turnkey projects to enhance margins by leveraging factors such as limited competition and economies of scale. The current order book stands at Rs 1,036 crore as of September 30, 2023, with an orderbook to sales ratio of 1.1x, thereby giving adequate revenue visibility, said Geojit Financial Services.

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It is available at a P/E of 29 times, which appears to be reasonably priced. Considering its consistent growth in both topline and bottom line, healthy return ratios, shift in mix towards margin accretive segments (large turnkey projects), customer stickiness and promising industry outlook, we assign a 'subscribe' rating on a medium to long term basis, it added.

ICICI Securities and Axis Capital are the book running lead managers for the InoxCVA IPO, with Kfin Technologies serving as the registrar for the issue. Shares of the company are scheduled to be listed on both BSE and NSE on Thursday, December 21.

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