Brookfield-Backed Avaada Electro Files for ₹10,000 Cr IPO; What’s the Play?

Green IPO Alert! Avaada Electro is bidding big to reshape the renewable energy landscape in India. The Avaada Group’s cell manufacturing arm and solar module are prepping up for an IPO. Avaada Electro has filed a confidential DHRP (Draft Red Herring Prospectus) with SEBI (Securities and Exchange Board of India) for a massive ₹9000 crore to ₹10,000 crore IPO (Moneycontrol). The exact split isn’t disclosed as yet by the company, but it intends to use its IPO proceeds to fuel its aggressive and transformative expansion plan. The Avaada Group is backed by the global investment giant Brookfield Renewable Partners and Thailand’s GPSE PTT Group (CNBC TV18).

The Avaada Electro IPO isn’t just another IPO; it is a strategic intent to become India’s fully vertically integrated solar manufacturing powerhouse. India is already striving hard to move towards substantial energy self-sufficiency with the ‘Make in India’ supply chain boost. However, the investors are looking to answer this important question: is this IPO the inflection point for India's green energy manufacturing ambitions, and what does it mean for the competitive landscape?

Why a ₹10,000 Crore IPO Now?

This public offering is timed to implement two significant goals. These are to capitalise on a confluence of strong investor appetite and massive private funding, as well as support the government policy framework. The ₹10,000 crore is earmarked for this singular and ambitious goal. Avaada Electro IPO is aiming to achieve full vertical integration and complete control over the solar manufacturing value chain. This "sand to module" strategy can be perceived as a considerable leap. There are many diverse aspects to these plans.

• Current Operations - Avaada Electro is already operating a substantial 8.5 GW of module manufacturing capacity (Scanx Trade).
  
• The Next Leap - The IPO proceeds would be used to fund a massive scaling operation. This includes plans to add 6 GW of capacity by January 2027 and another 6 GW in the following fiscal year (Business Standard).
  
• The Game-Changer: The strategic entry into the wafer and ingot sector by FY28 is vital to the plan.
  

This move into wafers and ingots is the actual icing on the cake.

Currently, India has a large module manufacturing capacity (around 100 GW). However, the country also has a much smaller cell manufacturing capacity (around 25 GW), and an even smaller capacity for wafers, the building blocks of cells (Livemint). Thus, even domestic manufacturers are forced to depend on imports for core components. Avaada Electro has planned to plug this gap. It is working towards securing its supply chain and capturing margin from the very beginning of the manufacturing process. But will this massive, capital-intensive pivot into deep-tech manufacturing pay off in a sector known for its rapidly falling prices and fierce global competition?

What Is the Significance of the "Confidential" Filing?

There is a relatively new mechanism (in place only since Nov 2022) provided by the securities market regulator.

Avaada Electro is adopting SEBI’s “confidential filing” route. Through this route, the company can file its DHRP with the regulator without the need to make it public at that point. That has been an aggressively strategic decision, but there are several reasons that it matters.

• Flexibility and Secrecy - Avaada can retain sensitive financial data and expansion plans published later than competition – till it is ready with them.
  
• Testing the Market - Perhaps more important, it can give the company and its bankers flexibility to test investor sentiment and market conditions before they are locked into a public offering. If the market sees a ton of volatility, it can postpone the IPO without having to weather all the bad press that comes with publicly pulling your filing.
  
• Timing Consideration - This Western method, a "pre-filing" tactic. But it’s new to India. It could indicate that Avaada’s high-profile backers are aiming to hit this mega-IPO at the right time so that they can garner maximum subscription and secure a good valuation.
  

Taking care to be gradual granted the company time to get its feet wet and prepare for launch from a position of power. But does this action betoken worry about market volatility? Or, is it simply a smart financial strategy to de-risk a ₹10,000 crore public offering?

Who are the Heavyweights Backing This Ambition?

The Avaada Electro IPO isn’t simply a speculative venture. It is the next logical step in a well-funded, long-term growth story. It is following one of India's largest-ever equity raises in the renewable energy sector.

In 2023, the Avaada Group successfully secured a staggering $1.3 billion in funding. This round was led by Brookfield Asset Management, which committed $1 billion, and existing investor GPSC (part of Thailand’s state-owned PTT Group), which committed $300 million (NDTV Profit).

It is important to acknowledge the existing backing from deep-pocketed, long-term institutional investors. It can also help to prove out the business model of the group, and form a secure base for this manufacturing spin-off. The Avaada Group is a power generation titan in its own right, having recently signed an MoU worth ₹36,000 crore (Bloomberg) to invest in Gujarat for one enormous hybrid portfolio of solar, wind and battery storage projects.

The IPO for Avaada Electro could be a classic example of value unlocking. It separates the high-growth, capital-intensive manufacturing business from the stable, long-term asset-owning power generation business. With such strong private backers already on board, what valuation will Avaada Electro target, and just how much appetite will the public markets have for this green-tech manufacturing giant?

Source

Bloomberg
Moneycontrol
CNBC TV18
Scanx Trade
Business Standard Livemint
NDTV Profit
The Economic Times