India's Inox Wind sets IPO terms

The wind energy supplier is the latest Indian company to seek to tap equity capital markets. Indian ECM issuance so far this year is double Hong Kong’s.

Inox Wind, an Indian wind energy company, has set the terms for an initial public offering of shares that could net the company and its principle shareholder more than Rs10 billion ($163 million).

The wind-turbine manufacturer wants to sell some 22 million primary shares and 10 million secondary shares at an indicative price range of Rs315 to Rs325 per share, according to a term sheet seen by FinanceAsia.

The secondary offering could net shareholder Gujarat Fluorochemicals, a chlorofluorocarbon refrigerant gas manufacturer, between $50 and $52 million, a source close to the deal said.

Inox Wind, a unit of India’s Inox Group, will begin taking anchor orders on March 17, with pricing expected around March 24 and the listing scheduled for April 9.

Half of the deal will be offered to institutional investors, and of this, 60% is allocated during the anchor bookbuild, the source said.

If the IPO is successful Inox Wind will have a market capitalisation of between $1.12 billion and $1.15 billion, depending on where the shares finally price.

Bank of America Merrill Lynch, Axis Capital and Edelweiss are joint global coordinators and bookrunners. Yes Bank will act as a lead manager.

Key sector

Wind energy in India is one of the sectors expected to benefit from Prime Minister Narendra Modi’s initiatives. The Indian government in August 2014 restored key tax initiatives for wind farms in an effort to reduce the country's dependence on imported fuels.

The proceeds from Inox Wind’s IPO will help to double its turbine blade-making capacity to 1,200 megawatts, with the firm striving to become one of the top three suppliers of turbines in India by year-end.

Investors have a variety of comparables when considering Inox Wind, including Suzlon Energy, Gamesa Corporation Tecnologica, and Vestas Wind Systems.

Pune-headquartered Suzlon Energy, which designs, manufactures, operates and maintains wind generating equipment, is currently trading on a trailing 12-month price-earnings ratio of 28.30. Its shares are up 92.7% so far this year.

Shares in Gamesa Corp, a Spanish wind turbine manufacturer and developer of wind farms, are currently trading at 19.29 times estimated 2015 earnings and are up 44% year-to-date.

Vestas Wind Systems, the Danish developer and manufacturer of wind turbines, meanwhile, is up 11% year-to-date. Other comparables include GE India and Wind World India.

Overweight India

India has been one of the most active Asian equity capital markets in recent months. So far this year, 19 companies have raised $6.46 billion, compared with the $1.44 billion that was raised by 20 issuers in the same prior-year period, according to Dealogic data.

The country's 2015 equity issuance is more than double Hong Kong’s, which has only seen $2.57 billion raised via 49 deals, the data shows.

It is also one of the best performing markets in the region. Mumbai's benchmark Sensex Index has put on 29% since Modi’s landslide victory in May and has risen 5% year-to-date.

“Investors had been underweight India for some time,” a source close to the deal told FinanceAsia. “Now Modi’s [in office], it’s probably one of the most overweight markets [for investors] right now. And it still feels like everyone likes India despite the fact it’s not cheap.”

Although a net 13% of allocators were underweight emerging market stocks in January, India was the most popular Asian destination for fund managers at the start of the year, according to Bank of America Merrill Lynch’s January fund manager survey.

There have been a number of jumbo equity raises recently as the government continues its efforts to sell minority stakes in state-owned enterprises and raise $10 billion to help lower its fiscal deficit. On February 1, India raised Rs226.1 billion ($3.6 billion) after offloading a 10% stake in state-run Coal India.

In addition, HDFC Bank raised $1.6 billion after a dual-share sale in the US and India on February 6. Other deals on the horizon include Tata Motors, which announced a Rs75 billion share sale, while State Bank of India aims to raise Rs150 billion.

Still, whether institutional investors will have the appetite for India long-term remains to be seen. Data showing the US economy picking up steam may encourage the US Federal Reserve to raise interest rates sooner than initially anticipated. This could lead to large institutional investors yanking millions of dollars from Asia and putting money in blue-chip US stocks.

"Hong Kong and China should be okay," one Hong Kong-based ECM banker not on the Inox Wind deal told FinanceAsia, partly because the Hong Kong dollar is pegged to the US dollar and the Chinese renminbi is managed against a basket of currencies, so the foreign exchange after-effects of a US rate rise should be limited. "But for other markets, including Japan and Southeast Asia, you may see people pull money," he said. "Global pensions and endowments may park more money in the US.”
Despite the fact that Asia’s structural and growth story is still superior to the US or Europe, any macro headwinds will undoubtedly have an impact on Asia, the ECM banker said.
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