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Concentrated revenue risk, dependence on government-owned transmission grids and infrastructure, and growth relying on winning highly competitive project bids are key risks for ACME Solar Holdings IPO, a brokerage firm said on Tuesday. 

The IPO is a mix of fresh issue of up to Rs 2,395 crore and an offer of sale (OFS) of up to Rs 505 crore.

According to a note by Bajaj Broking, the company focuses on the development, construction, ownership, operation, and maintenance of large-scale renewable energy projects.

It accomplishes this through its internal engineering, procurement and construction (EPC) division, and operations and maintenance (O&M) team. The company generates revenue by selling electricity to various clients, including those supported by the Central and state governments.

Citing key risks of its business, the brokerage note read: "Concentrated revenue risk: 63.22 per cent of revenue from Andhra Pradesh, Rajasthan, and Telangana; dependence on government-owned transmission grids and infrastructure and growth relies on winning highly competitive project bids."

ACME Solar's financial performance was lacklustre in the past years. The company reported a Rs 697 crore profit with revenue of Rs 1,466 crore in the financial year (FY) 2023-24. It reported a net loss of Rs 3.15 crore with Rs 1,361 crore in revenue in FY 2022-23.

As per the brokerage firm, For Q1 FY25 ending on June 30, 2024, it posted a net profit of Rs 1.39 crore on a total income of Rs 340.01 crore, driven by other income of Rs 147.02 crore and exceptional items worth Rs 748.69 crore in FY23.

The company operates with a very low margin. It reported PAT margins of 3.97 per cent (FY22), (minus) 0.23 per cent (FY23), 47.59 per cent (FY24), and 0.41 per cent (Q1-FY25).

ACME Solar’s IPO subscription opens on November 6 and closes on November 8. The company has kept the IPO price band between Rs 275 to Rs 289 per equity share.

As of March 31, 2024, ACME Solar Holdings Ltd had an operational project capacity of 1,320 MW (1,802 MWp) in solar power projects.

Additionally, it had a contracted project capacity of 1,650 MW, which included 1,500 MW (2,192 MWp) of solar power projects and 150 MW of wind power projects.

The company also had an awarded project capacity under construction amounting to 2,380 MW, consisting of 300 MW of solar power projects, 830MW of hybrid power projects, and 1,250 MW of FDRE power projects.