Oriana Power - SME play on Renewable Energy

[Sulabh_Anand]

Business Details:

1. About company: Oriana Power is a company that specialises in providing solar energy solutions to industrial and commercial customers.

2. Services & products: We offer low carbon energy solutions by installing on-site solar projects such as rooftop and ground-mounted systems, as well as off-site solar farms i.e. Open access.

3. Business Model: Our business operations are primarily divided into two segments: Capital Expenditure (CAPEX) and Renewable Energy Service Company (RESCO).

4. Capex Model: Under the CAPEX model, we offer Engineering, Procurement, construction, and operation of solar projects. In this model, customers invest in the Capital Expenditure on their own & Oriana does Engineering, Procurement, Construction, and Operations on behalf of the client. This model may be executed in various manners such as rooftop and ground-mounted systems, as well as off-site solar farms.

5. Benefits of Capex Model: The consumer is responsible for the risks associated with the operation, management, and maintenance of the system. Often the consumer finances this through bank funding. The owner can apply for the capital subsidy provided through the CFA (Central Financial Assistance) and additional subsidies provided by the respective state governments. However, in this model, the owner has the maximum risk.

6. Realisation on setting up 1 MW solar plant: Based on below comes around 4 crores/MW.

4. Cost of electricity under capex: Cost of Unit electricity is approx. less INR 2.0 for over 25 years,huge cost savings adjusted for the initial investment of setting up the plant.

5. Under the RESCO model also known as the OPEX model or BOOT (Build, own, operate, transfer), we operate through our 17 (seventeen subsidiaries). Our subsidiaries provide solar energy solutions on a BOOT (Build, own, operate, transfer) model basis, allowing our customers to enjoy the benefits of solar energy without the upfront investment. All the Investment, Commissioning and maintenance are done at our end and in lieu of that our company sells power to the end consumer through a Power Purchase agreement generally agreed for 25 years. This Business gives us Annuity income post recovery of Initial investment. However, the challenge is mobilising low-cost capital for meeting the requirements of system deployment.

Capex or cost involved : 4.5 cr for 1 MW of solar plant.

4. Deliveries: Under the Capex Model, it has delivered projects with capacity exceeding 100MWp .
5. Orders in pipeline as stated by company during IPO filing:Our continuous efforts for our development and expansion can also been justified by the list of projects which are in hand or are in the pipeline of its execution, or where our company has been duly empanelled, to name few:

We had an EPC project portfolio of more than 80 MW across India and Africa which combined 4+ MW of projects under floating solar, 13+ MW projects in ground-mounted and 55 MW+ projects in rooftop.

6. Order wins since listing: Total Now, Orianapower declared that this year they did 350 cr of revenues so in H2 they did 290 cr of sales vs 60 cr in H1.

Orderbook was 900 cr+ on 1st march 2024 and with today’s order of 325 cr, it should stand at close to 1235+ cr.

-20MW Coal India Jharkhand ( 138Cr)

-7MW cement Co Rajasthan(34.3Cr)

-29MW Steel Co karnataka(100cr)

-7.4MW ( 4 orders in up,Delhi, Rajasthan)

-They are getting into CBG including the recent one for 56 crores.

• 100 Cr. order win for 29 MW solar EPC work @3.44 crore/MW.

• 

-200MW order under implementation (RHP)

7. Clients under Capex Model:
8. Clients under Resco Model:

9. Revenues from clients:

10. Top Suppliers:
11. BOS costs for solar projects:

12. Raw materials Impact: At present, it imports 60–70% of its solar panels from China. Though solar panel prices in China has plummeted, ORIANA will not reap any benefits of this decline as any price fluctuation is passed on to the end-consumer. Imports may decline to 30–40% once ALMM regulations are implemented from April 2024.

13. Awards and recognition:

Growth:

1. Opportunities: At Oriana, we are committed to continuous growth and exploration of new opportunities. In 2019, we expanded our service portfolio to include floating solar installations, demonstrating our dedication to innovation and development. We are also close to exploring new avenues like Energy storage and Green Hydrogen.
2. CBG segment: They have ventured into the Compressed biogas segment with recent wins of 56 crores orders.
3. Hydrogen electrolyzers & reverse electrolysis: Its planning to manufacture both hydrogen electrolyzers (electrolysis) and fuel cells (reverse electrolysis) in the hydrogen value chain.They will also provide hydrogen projects EPC services just like solar EPC.

Profitability:

1. Margins : Both WAREERTL and ORIANA have guided at a sustainable EBITDA margin of ~17%. Any price fluctuation in solar panel prices is passed on to end-consumers while executing end-to-end EPC solar projects in India. Thus, shielding the profitability of EPC players.
2. Guidance: As Per guidance, trying to use IPO proceeds of 60 crores to develop 100 MW over next 2 yrs. Per guidance, 470 crores potential.

• FY 25 revenue: With the latest order of 325 cr, it should stand at close to 1225+ cr.
• 1800+ crores of revenue target for next 2 years with a 18% margin but key risk is execution.

Industry Tailwind:

1. Global Industry:

2. Solar Industry in India:
3. Energy demand and to be self reliant:
4. Government initiatives:

Competitive Advantages and Intensity:

1. Capabilities and experience:
2. Innovation tech : BESS (Battery Energy Storage System): Adapting to the growing reliance on renewable energy sources.

Hybrid Systems: Combining solar, wind, and battery technologies for reliable and sustainable energy.

Risks:

1. Our Company has given Corporate Guarantees of ₹ 7,437.00 Lakh in respect to the loan taken by its subsidiaries and associate companies. We cannot assure that there will be no default done by our subsidiaries in the future.
2. We may be unable to accurately estimate costs under fixed-price EPC contracts, fail to maintain the quality and performance guarantees under our EPC contracts, we may experience delays in completing the construction of solar power projects, which may increase our construction costs and working capital requirements and thus may have a material adverse effect on our financial condition, cash flow and results of operations.
3. Orders in our order book may be delayed, modified or canceled and letters of intent may be withdrawn or may not translate to confirmed orders, which may have a material adverse effect on our business, results of operations and financial condition.
4. Risk due to ALMM as cost escalates:
5. 

Management:

1. Shareholding pattern:

Financials:

1. Revenues over the previous years:

Disclaimer: Invested and biased, DYDD.

[fundoo]

Thanks Sulabh for starting thread on Oriana Power. It was long pending as it is one of the most promising renewable energy (solar, hydrogen, CBG) microcaps company.

Few Pointers:
1/ FY24 Numbers: As per crisil report, orderbook in March’24 was 900crs+. They are expected to report revenues of 350crs+ in FY24 (350crs is minimum, they can report 375-400crs as per my expectations), this is 3x vs FY23

2/ Order book: Current order book should be around 1100crs. They should keep getting new orders around the year specially now as they have successfully completed some big projects in last FY (like Coal India etc). Orderbook should be significantly more by FY25 end

3/ Valuations: It is expected that they should report 1100-1200crs revenues and 110-130crs PAT in FY25 (3x growth vs FY24). This translates to 19-22x FY25PE. Other competitors Waaree Renewables and KPI Green are trading at 50x FY25PE. Oriana is expected to show highest growth among the big players and trading cheapest.

3/ Solar Parks: They are currently setting up 350MW solar parks across three states. Concall should provide more details on these

• Rajasthan - 100MW (total 250MW)
• Maharastra - 50MW
• UP - 50MW

4/ International Expansion: They are also expanding to Middle East market and participating in Dubai Energy exhibition on 16th-18th April. This market is expected to be a big contributor for them in next 1-2 days as only handful companies have international experience.

5/ Both green hydrogen (electrolysers + EPC) and CBG (EPC) should be a big growth driver for the company apart from solar EPC.

6/ Management Bandwidth // Strategic Mentor: The have this unique management combination that there are three young promoters who are expert in their own areas: Rupal (Sales/BD); Anirudh (Investor Relations/Strategy); Praveen (Operations)

Also they have Prashant Jain (ex MD JSW Energy) as strategic investor and mentor who has very deep understanding of the renewable energy market.

Thanks

Disclosure: This is just a research note. This is not a buy//sell recommendation

[CnC]

The Middle East Energy 2024 exhibition in Dubai stands cancelled due to incessant unexpected rains in the UAE.

[sudipta_ghosh]

Nice thread. I have been studying this company for the last few weeks.
One of my concerns is valuation. Can someone though some light on this

[Prabhat_Mohanty]

I will request small investors not to be carried away. The solar power sector is hyped a lot. Just because Waaree and KP are quoting at high elevation should be enough to have caution. And a big negative is that the stock is in SME category. Moreover this sector has no MOJO. No special technology is required here and only factor that counts is execution. So it will be difficult to maintain the growth after this financial year. The company is expected to achieve above 1000 cr turnover in 2025 which will be almost 300% growth. But after this growth will come down. Also margin is bound to come down as cell and module price will not be that cheap due to Govt policy. So it is very risky to enter into a hot stock. All said, the stock may sky rocket in short term as is the trend currently.

[fundoo]

Multiple things here:

1/ Even after ALMM implementation, solar panel prices are expected to rise only 6-8% not more than that. Solar Panel prices are pass through to the clients. In fact, EPC cos have already locked in the low prices for next 1yr. Solar Panel Imports: Ban On Solar Panel Imports To Help Local Mfg But Increase Panel Prices | Jaipur News - Times of India

2/ Indian government has very high renewable energy targets and solar has high growth runways for next 4-5 years. This strong govt targets is bringing all the MOJO in the sector. Power sector is going to witness highest CAPEX among all sectors in next 5 years in India. And there are only handful EPC players which can execute large scale projects efficiently and within time.

3/ Oriana is not just solar EPC play. It is CBG and green hydrogen play also. India has target to setup 5000 CBG plants by 2027. Oriana won a single plant order for 56crs. This is a 250kcrs market opportunity. And there are many reports available on how big green hydrogen opportunity can be from 2026-27 onwards.

4/ Oriana has many growth levers in play with strong management execution capabilities. It is likely to deliver highest growth among peers yet trading at cheapest relative valuations.

5/ it is a highly illogical argument to make that just because a company is SME so its risky. They would be most happy to migrate to mainboard if SEBI relaxes 3yrs from ipo criteria.

H2 results presentation and concall will provide much clarity to investor community about management capabilities and their strategy/vision.

PS: its an individual decision to whether invest in a sector or not but making generic comments without much research about company fundamentals is not adding any value to anyone. And mostly investors ignore such comments

[fundoo]

Oriana H2 results on 2nd May. Lets see how it comes. I am more interested in the results presentation (future strategy) and management concall commentary!!!

—————————————————————

Oriana has delivered very solid FY24 numbers with a strong beat on all parameters (PAT came at 54crs vs market expectations of 40crs)

What’s more interesting is the detailed earnings press release (https://nsearchives.nseindia.com/corporate/ORIANA_03052024183822_EarningRelease_03052024.pdf) where they have mentioned the future strategy/roadmap and guidance. Some important pointers:

1/ Current order book stands at 250MW in Solar and 21 Tonnes in CBG (~1100crs) and order pipeline is 600MW (2400crs). Company is now eligible to participate in the large size project tenders

2/ Partnering with a financial institution to foray into residential rooftop solar market. Also, exploring strategic tie-ups with module manufacturers to secure supply chain and bring quality

3/ Already done technology tie-ups for Hydrogen Electrolysers, BESS, and CBG. Expanding into Middle East and African Markets

4/ Company is targeting 1GW capacity (4000crs revenues) in 2026. They are expecting significant growth in FY25 vs FY24

5/ Company is going to develop 920 acres land in solar parks or green hydrogen parks

[fundoo]

CBG EPC Opportunity size for Oriana:

Gruner is expecting 5000crs orderbook from 100 CBG plants (50crs per plant) in FY25 after starting operations in 2023. India plans to add 5000 CBG plants by 2027, this is 250,000crs market in next 3 years!!!

“Noida-based Gruner Renewable Energy announced this week that it has bagged multiple projects worth INR 1,500 crore ($180 million) for compressed biogas (CBG) plants across the country. The company bagged these projects within the first year of its incorporation.

Gruner stated it secured eleven projects valued INR 1,100 crore from a leading business conglomerate in India and 19 other projects worth INR 400 crore from individual business leaders.

Gruner will develop these CBG plants across India. The plants will have a cumulative CBG production capacity of 88,000 tons per year. The projects will be strategically located across various cities, including Ayodhya (Uttar Pradesh), Satna (Madhya Pradesh), Balasore (Orissa), Navsari (Gujarat), Yavatmal (Maharashtra), Vijayawada and Rajahmundry (Andhra Pradesh), and others.

For smooth operations of these projects, Gruner will add around 900 professionals and skilled labour taking its workforce to a total of 2,500 employees including site workers by next quarter.

Utkarsh Gupta, founder and CEO, Gruner Renewable Energy, said, “Currently, India satisfies about 85% of its crude oil demands through imports. However, there is a gradual effort underway to expand biofuel production capacity within the country. By leveraging our current orders in hand, we aim to reduce India’s overall expenditure on crude oil imports by INR 8 billion. Furthermore, our efforts aim to benefit farmers and generate employment in the energy industry, fostering awareness and development. We aspire to play a pivotal role in India’s commitment to becoming a net-zero economy by 2070 through renewable energy.”

Gruner, which started its operations in February 2023, currently oversees a robust portfolio comprising 30 on-going projects nationwide. The company aims to augment its project count to 100, aiming new order value of INR 5,000 crore in the current FY 2024-25.”