(vaibhav) #41

Manoj, could you pls share the source for info on april-june orders for inox? Thx.

I can see 2 orders worth 170mw ( 70mw +100 mw) for April month itself (just googled) -

(Manoj Agarwal) #42

Suzlon which was facing a huge working capital problem in 2014-15 has over come that with capital infusion by Dilip Sanghvi both in the form of equity capital and a line of credit. So the execution cycle has been shortened and credibilty restored.
Gamesha follows calendar year as their accounting year and so 2nd qrt 2016 means Apr- June 2016.

Also if you go back and listen to the Con Call for Dec 15 of Inox where the explanation what the management gave for revenue recognition for not able to supply 40 MW they totally reversed their statement in the March 16 con call. Don.t like management which lies through their teeth.

(niranjant) #43

Wins in Q1:

Revised Press Release - Inox Wind wins 50 MW order from Atria Power
Inox Wind Bags 100 MW Order from Leading Renewable Energy IPP
Adani Enterprises enters Wind Energy Segment by placing 70 MW Wind Turbine Orders with Inox Wind

That is a total of new orders for 220 MW for a Q1. 25% of the capacity is gone in Q1 itself. :sunny:

(Manoj Agarwal) #44

My mistake, actually 50 MW from their last con call on 6th May till date. Last two and a half months only 50 MW.

(Manoj Agarwal) #45

Further Siemens and Gamesha have agreed to merge thus creating a stronger entity in Wind energy sector.

(Manoj Agarwal) #47

Dec 15 qrt excerpt:

Jonas Bhutta: I just wanted to understand you said that on the revenues that were missed because of this slipup
in terms of components not coming in time, the implied EBITDA margin works out to
about 24%?
Devansh Jain: No, 18%.
Jonas Bhutta: So on a 247 crores lower revenue, you said that EBITDA would be about 59.5 crores?
Basically you mentioned that if had it been not for this amount your EBITDA for the quarter
would be closer 216 crores.
Deepak Asher: If you are computing the EBITDA purely on the missed revenues versus the missed EBITDA,
yes it would translate to roughly about 24%. But I don’t think in your accounting that is the
right way to do it because the fixed costs would already have been embedded in the existing
Jonas Bhutta: Okay, got it.
Devansh Jain: You can see that in this raw material prices going down fixed costs have gone up from 4% to
Deepak Asher So in that sense this 24% EBITDA is really actually on marginal cost basis because your fixed
overheads is already been loaded on the existing operations

March 16 qrt excerpt:

Amar Kedia: Secondly if you go back to Q3 concall I remember you mentioning that there was this consignment
stuck at the customs, large part of the cost had already been booked, but revenue of course was not
booked because the consignment itself was not delivered and now that in Q4 you have booked that
revenue should not your margins have expanded because costs were already booked in Q3?
Deepak Asher: I think there is a misunderstanding, we never said that cost were booked in Q3, what we did say was
that the production had occurred and the costs have been incurred and that will be reflected in
inventory and not debited to the P&L account. The costs gets debited in terms of depletion of
inventory and sales get reflected as revenue, so that itself would not lead to an expansion of margins,
it would lead to an expansions of revenues and cost, but the margins would still be around that level.
INOX Wind Limited
May 06, 2016
Page 19 of 23
Amar Kedia: To correct here, what I meant to say is that not on the gross margin side, but below that, the fixed
overheads anyways would have remain the same, you are basically talking of some additional revenue
from Q3 flowing to Q4, so margins at least because of the fixed overhead should have gone up?
Deepak Asher: Yes but to the extent, no, if you look at how inventory is valued it is valued at total cost including
plant overheads, so what happens is that to the extent that cost are incurred that carry forward as
inventory to the extent of that consignment.


(Rohit B) #49

this stock has been a major underperformer and my nemesis. do the fellows here see any sense in holding this longer or better to book the losses and move on?



I am down almost 25% and am a believer. Working capital has peaked at March 31 every year due to Q4 order booking, and not sure why people are freaking out this time around. Quoting their NDR report

In FY16, INXW’s WC was stretched due to a 187% increase in new projects commissioning to 786MW and a product-to-capacity mismatch. For FY17, INXW expects WC to improve to 90days from 133days, resulting in solid FCF generation and a zero debt balance sheet by end-FY17. Management expects to achieve these goals through better payment terms with clients (focus on LC-backed contracts), synchronized delivery of components and execution (post new capacity expansion), and stable
20% volume growth. Further, a group company will repay a short-term loan of INR2.8b to INXW by end-FY17.

Stock trades at 8x FY17 P/E and 6x FY17 EBITDA. Not much by way of downside risk from 200 levels. I think you will see a significant improvement in NWC situation in June quarter results and the stock will pop back.

(Manoj Agarwal) #51

Classic value trap. I also got caught up and finally exited at 256 in May 16. Competitive intensity has increased in the sector.
Final nail in the coffin is downgrade of outlook to negative by crisil:

Disc: Exited at a loss.


CRISIL has no new information, their rating has been revised on the basis of the same March 31 numbers.I am not a fan of general investing jargon, like value trap or growth trap since it makes for some lazy generalising. This is a 25% RoE business where EPS grew 50% last year and will grow atleast 25% this year. There is no conceivable case for a single digit P/E multiple here

See CRISIL report below

CRISIL has revised its outlook on the long-term bank facilities of Inox Wind Limited (IWL) to ‘Negative’ from ‘Stable’ and reaffirmed the ‘CRISIL AA-’ rating. The ‘CRISIL A1+’ rating on the company’s short-term bank loan facilities and commercial paper programme has also been reaffirmed.

The outlook revision reflects CRISIL’s belief that IWL’s credit risk profile may be constrained over the medium term because of its large receivables. Contrary to CRISIL’s earlier expectation of a decline in the receivables because of increase in equipment supply orders and alignment of manufacturing capacity of various components, the receivables increased to 148 days as on March 31, 2016, from 140 days as on March 31, 2015. This is because some projects were stuck on account of pending commissioning or power purchase agreements (PPAs), and manufacturing capacity of components was not fully aligned. IWL expects resolution of the pending projects and the pace of receivables collection to improve in the next few months. The inventory and receivables will also improve once the full benefit of the Madhya Pradesh plant, commissioned in November 2015, starts accruing. However, most of the orders are expected to be turnkey projects, which entail a longer collection cycle than equipment supply orders. Time-bound correction in the receivables collection cycle will remain a key monitorable.

The ratings continue to reflect IWL’s healthy market position, strong operating efficiency, and support from parent, Gujarat Fluorochemicals Ltd (GFL; ‘CRISIL AA/Stable/CRISIL A1+’). These strengths are partially offset by the company’s large working capital requirement, and susceptibility to technological and regulatory changes.

IWL has benefited from healthy demand for renewable energy, and is one of the leading wind energy equipment manufacturers in India. It had orders of 1104 megawatt (MW) as on March 31, 2016, against just 300 MW as on March 31, 2014. The company has sourced technology from AMSC Windtech, Austria, which has over 15 gigawatts (GW) of wind capacity globally. IWL’s considerable inventory of wind sites for over 5000 MW provides it with a competitive advantage in securing and executing large orders.

IWL’s revenue grew 2.8 times over the three years through fiscal 2016, and its healthy order book provides revenue visibility over the medium term. The company reported average return on capital employed (RoCE) of 25.3% and operating margin of 14.7% in the three years through fiscal 2016. Its market position will continue to be supported by its healthy order book, strong technology tie-ups, and robust execution capability.

GFL holds 63% equity stake in IWL, and the company is central to the parent’s growth plans in the wind energy business and has grown rapidly over the past three years. CRISIL believes GFL will continue to extend timely support to IWL, if required.

IWL’s operations are working capital intensive because of substantial receivables, driven by the large proportion of turnkey projects in its order book. Delays in commissioning or signing of PPAs have also resulted in a long collection cycle. Although the stretched working capital cycle led to increase in debt to Rs 14.7 billion as on March 31, 2016, from Rs 8.7 billion a year earlier, healthy cash accrual supports the company’s debt protection metrics and gearing. IWL had cash and equivalent of Rs 4.8 billion as on March 31, 2016, which supports liquidity. Its interest coverage and net cash accrual to total debt ratios were 8 times and 0.3 time, respectively, for fiscal 2016, while gearing weakened to 0.8 time as on March 31, 2016, from 0.6 time as on March 31, 2015. The working capital cycle could improve in fiscal 2017 on account of resolution of pending projects and full benefits of alignment of manufacturing capacity. The pace and extent of correction in the working capital cycle will be key rating sensitivity factors.

IWL is susceptible to technological changes in the wind energy sector, even though its strong relationship with AMSC Windtech helps mitigate the risk. Moreover, wind power generation is subject to complex regulations and is supervised by multiple regulatory authorities. Any adverse impact of regulatory change, such as lowering of feed-in tariffs or withdrawal of benefits to wind power producers, may affect capacity addition in the industry, and hence, IWL’s operations.

For arriving at the ratings, CRISIL has combined the business and financial risk profiles of IWL and its subsidiaries.

Outlook: Negative
CRISIL believes IWL’s working capital cycle will remain stretched, leading to large debt and risk of non-recovery of certain receivables over the near term. Its cash and cash equivalent will support liquidity. The ratings may be downgraded if the working capital cycle does not correct, or if the company’s operating performance declines considerably, or if support from GFL reduces. The outlook may be revised to ‘Stable’ if the operating performance and working capital cycle improve on a sustainable basis.

(Manoj Agarwal) #53

From 6th May 16 when they had their con call till date i.e. three months IWL has won only 50 MW of order as against their claim in the con call of a very strong pipeline of over 1000 MW under negotiation stage. Wonder what happenet. But did see that Gamesha has won the following recently:

Gamesha Renewable Pvt Ltd has not submitted its Annual Report to ROC for 2015-16 which can be a good source to compare exactly how IWL is faring viz a viz its main competitor.

Anyway I sincerely hope things work out for the investor community in IWL.

(paresh.sarjani1) #54

India will introduce competitive auctions for wind farms this year in a bid to fulfill Prime Minister Narendra Modi’s goal for 60 gigawatts of capacity by 2022.
Varsha Joshi, joint secretary at the new and renewable energy ministry, said the auctions for 1 gigawatt of capacity will start in two months and have a minimum size of 25 megawatts. The ambition is to spur trading of wind power between states.
“The purpose is to achieve the target of 60 gigawatts of wind capacity, which can’t happen only with wind energy being absorbed in the states that produce it,” Joshi said in a phone interview.
The auctions for power-purchase agreements are meant to stimulate investment that hasn’t been flowing fast enough to reach the target. India installed a record 3.46 gigawatts of wind farms last year, bringing capacity to 27 gigawatts. At the same time, hundreds of megawatts of projects are struggling to find buyers, and utilities are reluctant to buy renewable power, which is more costly than what coal plants generate.


Fair point, I think they will lose a few points of market share, but as I said, none of the business metrics make it deserve a single digit PE multiple. There is some panic in the streets now and hence the case for a buy. I wouldn’t buy this stock at 15x PE


This might give you a wide overview -

But still, I’m bullish on INOX wind. It doesn’t deserve such a low valuation.

Invested: lost 10%

(puneetc) #57

Inox got a repeat order of 50MW for Surya Vidyut yesterday

(chintri) #58

Just last april Inox wind jumps 31.5% to Rs 427.4 on listing day.
Issued @ 325, 52wkhigh 400+ CMP 190

(Rajeev M. Parashar) #59

Inox Wind says margins to increase with new orders. In an interview to CNBC-TV18, Devansh Jain, Executive Director of Inox Wind, talked about the company’s order book, getting repeat orders from CESC’s subsidiary, and why he expects better margins on newer orders going forward.

Well, he sounds very confident, or he is trained to ‘sound’ confident.

Disclosure: Invested, & hence sweating. :slight_smile:

(niranjant) #60

Devansh has consistently expressed that the working capital cycle as per the typical accounting std definition does not give the true picture. He has been consistent with his explanation on the same. He has also been consistent in affirming that the focus is on reducing the actual short term debt ( for which the company is paying interest ) by getting LCs before the turbines are shipped out. No more chasing is what he told!.

I would like to highlight certain points over here:

  • Additionally, I will turn bearish ONLY IF the numbers he has confirmed does not realise. i.e, a booking of 700-800MW within the next two quarters is almost finalised!. This will push the numbers to 1000s, on par with the entire last FY with one quarter left ( and, Q4 is the strongest.)

  • As of March 2017, government might revert the tax saving accelerated depreciation provisions. Even then the order book is targeted to grow by 20% YoY! this is far more lucrative than other industries. Suzlon gets most of their revenue from the IPP projects, which are more dependent on this tax provision than Inox is ( INOX has a lot more clients in other areas. Check their last presentation, dated Feb 2016).

  • The Ambit Capital analyst (not disclosing his name here, But i do know his assumptions are invalid to be fair!) has been the most bearish analyst on INOX wind. He has asked idiotic questions for which the management was certainly defensive on personal note ( I believe that is because of his two previous negative report on INOX). Other brokerages are still +ve on INOX!. Apart from that guy (whom I don’t believe as he has constantly tugged on his assumptions even though management gave fairly detailed reply on his queries), other analysts are still stuck with their analysis, with the added exception from CRISIL which does not have any other explanation other than the working capital cycle issue on the degrade!.

  • Exposure of Reliance Opp fund has been steadily increasing in INOX over the last one year!. from 1% to 2%. This is out of the 15% on the public cap!. Sundaram holds another 1%. I’ll be worried if either of them has reduced holdings by the next quarterly statement. I heavily doubt it!. This looks more like some bearish guy is shorting it with optimism on bad news from AMSC!.

  • AMSC has given exclusive rights on indian manufacturing of its technology along with the knowhow. If AMSC goes bankrupt (which is the actual premise for this dip, INOX can still manufacture this turbine!, and may even save royalty!). The 3MW WTG in collaboration with INOX is also critical and iNOX will have the technical know how. Thank Bajaj or Hero in automobiles and visualise INOX in that perspective!

Additional Note:

The recent slip is due to the disclosure from AMSC quarterly results ( ) , which has disclosed that their revenue is heavily dependent on INOX ( which is around 63% of its total revenue). With a 63% revenue from INOX, this makes INOX a very important partner!. think how much INOX will benefit if AMSC strictly partners with them. Apart from Siemens-Gamesa, AMSC has the best technology in WTG technologies!.

AMSC stock has slipped around 30% in the last one week since its result. Guess how much INOX slipped? !

AMSC Price:

INOX Price:

Disclosure: I’m constantly averaging on scrip at every 5% dip. Have 5% exposure in my portfolio YTD.


Thanks for this. I quote an AMSC research report below. Sounds like Q1 results will be bad but Q2 / Q3 should be much better

Shares of AMSC traded sharply lower following poor guidance coming out of the
call, predominately due to ongoing liquidity issues at its largest wind customer. We
believe this selloff is overdone, as we remain optimistic that results will normalize in
forward periods as its customer moves past working capital issues, and various other
_technologies advance towards commercialization.

_Key takeaways/comments from the call were as follows: (1) Order patterns from Inox are
starting to pick up now that their working capital challenges seem to have abated. (2)
Inox paid the ~$2mn license on July 25th associated with the $210mn 3-4 year contract
and has started placing orders which require letters of credit. (3) Guidance for the
September quarter is light due to Inox’s slow start and strict LC terms that AMSC has in