Inox India IPO opens today; should you subscribe?

The initial public offering (IPO) for Inox India (InoxCVA) opens for subscription on Thursday for three days until December 18. The company is offering its shares within the fixed price range of Rs 627–660 a share, with a lot size of 22 shares and multiples thereof.

The IPO aims to generate funds solely through the offer-for-sale (OFS) route, with the promoters and other selling shareholders divesting their shares, implying that the company itself won't receive any proceeds from this issuance.

Ahead of the IPO, InoxCVA secured Rs 437.8 crore from anchor investors, finalising the allocation of 66,33,285 equity shares at Rs 660 apiece. Notable global investors such as Abu Dhabi Investment Authority, Nomura Trust, Goldman Sachs, Carmignac Portfolio, HSBC Global, Volrado Venture, and Natixis International Funds have already invested in the company through the anchor book.

About the company

Established in 1976, Inox India specialises in supplying cryogenic equipment, particularly tanks, offering solutions for cryogenic conditions' equipment, from design and engineering to manufacturing and installation.

InoxCVA's specialisation extends to providing beverage kegs, customised technology, and turnkey projects, catering to a wide array of industries including industrial gases, liquefied natural gas, green hydrogen, energy, and more. As of September 2023, the company has serviced 66 countries, spanning from the United States and Saudi Arabia to the Netherlands and Australia.

IPO reservations

The offering has an allocation of 50 per cent to qualified institutional bidders (QIBs), 15 per cent to non-institutional investors, and the remaining 35 per cent to retail investors. 

With ICICI Securities and Axis Capital leading the book-running and Kfin Technologies handling the registrar duties, InoxCVA's shares are set to be listed on both the BSE and NSE on December 21, post-closure of the IPO bid on December 18.

Should you subscribe? 

Nirmal Bang brokerage recommends subscribing to the issue on the investment rationale that the company has strong financial performance, a large portfolio of specialised cryogenic equipment engineered to global quality standards, and a rising demand for cleaner fuels such as LNG and hydrogen due to the focus on reducing carbon emissions from conventional energy sources.

"Inox is among the top 10 companies globally and the largest in India in the business of manufacturing complex cryogenic solutions, which are highly critical for the user industries. This is reflected in the company’s superior EBITDA margins at over 21 per cent, much higher than the average of listed capital goods players. Combined with strong asset returns of 1.4–1.8x historically, Inox has consistently delivered ROCE of over 30 per cent in recent years," the brokerage firm said. 

"The increasing importance of green fuels like liquid hydrogen and the preference for LNG over diesel is leading to robust topline growth for Inox. Revenue grew by 14 per cent CAGR over FY20–23 and by 16 per cent in H1FY24. This growth is broadly in line with listed Capital Gods players. Inox is valued at 29x H1FY24 annualised EPS, which we believe leaves some scope for listing gains. Thus, we recommend subscribing to the issue," it said.