Inox India IPO: A Complete Analysis for Indian Investors

Inox India’s Key IPO Details

Scheduled to kick off its IPO subscription on December 14 and conclude on December 18, Inox India is not just another participant in this IPO wave but a strategic player in the cryogenic equipment sector. The company is planning to raise Rs 1,459 crore solely through an offer-for-sale (OFS). The IPO price band for Inox India is set at Rs 627 to **Rs 660 **per equity share. The Gujarat-based company has cultivated a robust global presence, emerging as a preeminent leader in the domain of vacuum-insulated cryogenic equipment. Here’s more about the company’s business…

Business Highlights

Inox India Limited is the largest supplier of cryogenic equipment in India by revenue in Fiscal 2023. (Source: CRISIL Report, November 2023). The company has over 30 years of experience offering solutions across design, engineering, manufacturing and installation of equipment and systems for cryogenic conditions. Its offering includes standard cryogenic tanks and equipment, beverage kegs, bespoke technology, equipment and solutions as well as large turnkey projects which are used in diverse industries such as industrial gases, liquified natural gas (LNG), green hydrogen, energy, steel, healthcare, chemicals and fertilizers, aviation and aerospace, pharmaceuticals and construction.

In addition, the company manufactures a range of cryogenic equipment utilised in global scientific research projects.

The company’s business comprises of three divisions:

• Industrial Gas: This division manufactures, supplies and installs cryogenic tanks and systems for storage, transportation and distribution of industrial gases like such as green hydrogen, oxygen, nitrogen, argon, carbon dioxide (CO2), hydrogen and provides after-sales services.
• LNG: This division manufactures, supplies and installs standard and engineered equipment for LNG storage, distribution and transportation as well as small-scale LNG infrastructure solutions suitable for industrial, marine and automotive applications; and
• Cryo Scientific: This division provides equipment for technology intensive applications and turnkey solutions for scientific and industrial research involving cryogenic distribution.

Cryogenic Industry Overview

Industrial gases are used in industrial processes for manufacturing products in a wide range of industries. Nitrogen, oxygen and natural gas are the major gases which would account for almost 80% of the cryogenic equipment demand. Other gases would include argon, helium, nitrous oxide, ethylene, and carbon dioxide. Nitrogen, oxygen and argon are atmospheric gas. The major sources of industrial or cryogenic gases are atmospheric air, which separated into its constituents (such as nitrogen, oxygen, argon, etc.) by air separation units (ASUs). There are four major groups in the cryogenic industry:

• Raw material manufacturers: They include metal and metal part manufacturers that produce large quantities of steel and steel products, which are the major raw materials for cryogenic equipment.
• Cryogenic equipment manufacturers: They manufacture equipment such as tanks, valves and vaporisers, which enable storage and handling of cryogenic gases.
• Gas suppliers: They include industrial gas manufacturers operating air separation units, or oil and gas companies producing LNG.
• End-users: They are industries where such gases are used, e.g., steel, glass, semiconductor and hospitals.

The equipment used to store, transport and handle the cryogenic gases in liquid form is collectively referred to as cryogenic equipment. Air Separation Units accounts for approximately 58-62% of the demand for total global cryogenic equipment consumption in calendar year 2021. And the major cryogenic equipment includes tanks, valves, vaporisers and pumps. So, that gives us the idea of what the cryogenic industry is about and the industry segments Inox India caters to. Let us now go over some key numbers for Inox India Limited.

A Look at the Numbers

Customer Base: Inox India has a diversified customer base across industry sectors and geographies. In the six months ended September 30, 2023 and in Fiscal 2023, Fiscal 2022 and Fiscal 2021, it provided equipment and systems to 1,255 domestic customers and 254 international customers across its three divisions. The table below provides the company’s revenue from operations from top customers:

The company also has a strong international customer base.

Geographical Spread: In the six months ended September 30, 2023, and in Fiscal 2023, Fiscal 2022 and Fiscal 2021, it exported products and delivered services to 66 countries.

Some of the key geographies for the company’s products and services include the United States, Saudi Arabia, the Netherlands, Brazil, Korea, United Arab Emirates, Australia and Bangladesh. Here’s a look at the export numbers:

The company intends to continue geographic expansion and market standard equipment business internationally, including its cryogenic storage tanks, transport tanks, microbulk tanks and disposable cylinders.

Key Ratios: Here is how the ratios of Inox India look:

**Revenue and Profits:**The following table sets forth the company’s earnings before interest, taxes, depreciation and amortisation expenses (EBITDA) and margins for various periods

In FY23 the company witnessed a 17% increase in its net profit, totalling Rs 152.71 crore, as opposed to Rs 130.5 crore recorded in FY22. Revenues demonstrated a growth of 23%, reaching Rs 984.1 crore in FY23, compared to the Rs 803.7 crore reported in FY22.

In Conclusion

The Indian cryogenic equipment market size is estimated to be $353 billion in calendar year 2022. The demand for cryogenic equipment in India grew at a steady compounded annual growth rate (CAGR) of 6.8% between calendar year 2017 and calendar year 2019.

Going forward, demand for cryogenic equipment in India is expected to grow at a CAGR of 7.2% between calendar year 2023 and calendar year 2028, according to the CRISIL Report.

This growth is expected to be driven by increase in industrial output, increase in investments in electronics and space sectors and shift towards cleaner fuel sources such as LNG and hydrogen in the industrial and transport sector.

Inox India has been able to quickly take advantage of the market opportunity since it has invested in increasing its installed capacity of cryogenic tanks and related items to 3,100 Equivalent Tank Units and 2.4 million disposable cylinders in Fiscal 2023 and Fiscal 2022, from 2,200 Equivalent Tank Units and 1.4 million disposable cylinders in Fiscal 2021.

For the six months ended September 30, 2023, it had installed capacity of cryogenic tanks and related items of 1,550 Equivalent Tank Units and disposable cylinders of 1.2 million units.

The company also has a healthy balance sheet and it has been funding all its capex internally, including working capital requirements.

The company also stated that the primary reason of doing this IPO is to gain visibility. And since exports is a core component of the company’s strategy, going forward to being a publicly listed company certainly will help it as the company tries and gain market share in the global economy in cryogenics.

Going forward, the company is looking to capitalise on opportunities in LNG and hydrogen as part of the global clean energy transition. Moreover, it is also strategizing to expand their large turnkey project business.

Overall, the time for Inox India’s IPO couldn’t have been better.

The INOX India IPO has reserved 50% of the shares in the public issue for qualified institutional buyers (QIB), 15% for non-institutional investors (NII), and 35% of the offer is reserved for retail investors.

Nevertheless, as we have highlighted in the past, the inherent risk in any IPO lies in its valuations and one should look out for it before making a decision to subscribe to any offering.

This is because the IPO serves as just an initial entry point for investment. And investors and traders should subscribe to them after evaluating the risks and rewards and the individual investing profile.

It will be exciting to see how the Inox India IPO performs on the listing day on the bourses.

We will keep you updated on all the developments from this space. Stay Tuned!