Saatvik Green Energy Ltd. (Avoid)

Highlights

Saatvik Green Energy Limited (SGEL) incorporate on 2015, engaged in the business of engineering, procurement and construction (EPC) and module manufacturing. Company also provides operations and maintenance (O&M) services to clients mainly in the context of EPC projects.

The solar energy products of the company are: (i) monocrystalline passive emitter and rear cell (Mono PERC) modules; and (ii) N-TopCon solar modules, both of which are available in mono-facial and bifacial variants for different applications, residential, commercial and utility-scale solar projects, etc.

The company has provided solar modules for some of its solar installation projects, including the 61.42 MW floating solar power project at Ramagundam, Telangana in FY23, one of India’s largest floating solar power plants and the supply of 72.15 MW of solar modules for the Raghanseda Solar Park in Banaskantha district, Gujarat during FY23.

The company has two module manufacturing facilities located in Ambala, Haryana covering an aggregate land area of 724,225 square feet. Company also has a network of 53 selling partners, which include 23 resellers, 19 distributors and 11 channel partners across various states in India.

Out of the total proceeds of Rs. 9,000 mn, Rs. 4,772 mn would go towards investment in the wholly owned Subsidiary, Saatvik Solar Industries Private Limited, for setting up of a 4 GW solar PV module manufacturing facility, Rs. 1,664 mn would go into investment in the wholly owned Subsidiary, Saatvik Solar Industries Private Limited, in the form of debt or equity for repayment/prepayment of borrowings, Rs. 108 mn would go towards repayment of certain borrowings, ~Rs. 456 mn would go towards general corporate purposes, and Rs.  2,000 mn would go towards existing selling shareholders of the company.

Key Highlights

• The market size of the domestic solar-powered pump systems rose at a CAGR of 15 pct from Rs. 19.3 bn in FY19 to ~Rs. 39 bn in FY24 and is forecast to reach Rs. 300-320 bn by FY29, witnessing a significant CAGR of 52 pct between FY24 and FY29.
• SGEL offer a wide range of solar modules designed to reduce energy loss and improve efficiency. Its products include Mono PERC and N-TopCon modules, available in both monofacial and bifacial types for residential, commercial, and utility projects. Company uses advanced M10 technology for Mono PERC modules and M10, G12, M10R, and G12R technologies for N-TopCon modules, ensuring high performance and reliability.
• The company is setting up a new integrated solar facility in Odisha with 4.80 GW cell manufacturing capacity (expected by FY27) and 4.00 GW module capacity (expected by FY26). This expansion complements a 1 GW capacity increase at their Ambala facility, which will be ready by early FY26. These additions will raise total manufacturing capacity to 8.80 GW across both sites, enhancing production to meet growing demand.
• As of FY25, SGEL’s order book stood at over 3.5 GW or over Rs 50 bn (2.3x of FY25 sales) indicating near term sales visibility. Company clocked 83.7 pct capacity utilization at 1,459 MW out of its effective installed capacity of 1,743 MW.
• SGEL’s key strategies includes (i) Backward Integration into Cell Manufacturing (ii) Maintain Position in the Solar Industry and Focus on Growing Share of Export Sales and EPC Services internationally while expanding Customer Base in India and Internationally (iii) Continue to Develop and Reinforce Technology to Manufacture Quality Modules (iv) Expand Distribution Network across India and Create Retail Brand for Solar Panels.
• SGEL’s key strategies also involves operations and further capex related to solar module and cell manufacturing in a fully owned subsidiary “Saatvik Solar Ind. Pvt. Ltd., this is done because of the substantial corporate tax rate difference between Saatvik Green Energy and Saatvik Solar Ind. i.e. 25 pct and 15 pct respectively.
• Sales of the company has grown by 88.2 pct CAGR YoY in over FY23-25 and EBITDA and Profit grew by 363.5 pct CAGR and 569.7 pct CAGR over same period. During FY25 the sales of the company jumped by 98.4 pct YoY to Rs. 215834 mn. While EBITDA of the company grew by 116.7 pct YoY to Rs. 3199 mn and EBITDA margin increased by 125 bps to 14.8 pct in FY25. During FY25, the company reported profit of Rs. 2,139 mn, which grew 112.9 pct YoY.

Key Risk

• The solar industry evolves rapidly, requiring the company to constantly innovate and invest significantly to adopt new technologies and stay competitive.
• SGEL is subject to counterparty credit risk and delays in receiving payments could adversely affect its financial condition and cash flows.
• SGEL bids for EPC projects through a competitive bidding process for its projects with government entities and PSUs. Failure to be awarded such projects may adversely affect its business, results of operations, cash flows and financial condition.

Financial Performance

Peer Comparison Based on FY25

Valuation

Saatvik Green Energy Limited, a solar photovoltaic module manufacturer with an operational capacity of about 3.80 GW.  With robust orderbook of Rs. 50,769 mn SGEL is well positioned to sail on Green Energy theme. At the upper end of the price of Rs. 465, the issue quotes at a PE of 27.6x on FY25 post issue earnings. The issue looks fully priced. One can Avoid this issue.

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