Premier Energies IPO: Caution Advised

Premier Energies Introduction

Premier Energies, established in 1995, is a leading integrated solar cell and solar module manufacturing company based in India. The company is backed by GEF Capital, a private equity investor from Washington DC.

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Brief about Premier Energies

Summary of the business of Premier Energies

As of March 31, 2024, Premier Energies is India’s second largest integrated solar cell and module manufacturer as well as India’s second largest solar cell manufacturer in terms of annual installed capacity with 2 Gigawatts (“GW”) for cells and 3.36 GW for modules. In addition, we have a presence in other steps along the solar power value chain such as providing engineering, procurement and construction (“EPC”) solutions, operating and maintenance (“O&M”) services and being an independent power producer (“IPP”). Premier Energies have five manufacturing facilities in Hyderabad, Telangana, India.

History

Company was originally incorporated as a private limited company with the name “Premier Solar Systems Private Limited” under the provisions of the Companies Act, 1956, at Hyderabad, India, pursuant to a certificate of incorporation dated April 3, 1995, issued by the Registrar of Companies, Andhra Pradesh. Subsequently, pursuant to a Board resolution dated May 6, 2019 and a resolution passed at an extraordinary general meeting dated July 25, 2019, the name of Company was changed to “Premier Energies Private Limited” and a fresh certificate of incorporation dated August 6, 2019 was issued by the RoC. Upon the conversion of our Company into a public limited company, pursuant to a Board resolution dated September 3, 2019 and a Shareholders’ resolution dated September 4, 2019, the name of Company was changed to “Premier Energies Limited” and a fresh certificate of incorporation dated September 25, 2019 was issued by the RoC.

Premier Energies Promoters & Board of Directors

• The Promoters of Company are Surender Pal Singh Saluja and Chiranjeev Singh Saluja

Premier Energies Board of directors

Premier Energies Share Holding pattern

Premier Energies Strength

• Premier Energies is India’s second largest integrated solar cell and solar module manufacturer as well as India’s second largest solar cell manufacturer.
• Premier Energies have a long track record in solar module manufacturing sector
• Premier Energies have technical expertise in solar cell line production
• Premier Energies have diversified customer base with strong customer relationships both within India and overseas with a strong order book.
• Premier Energies have an experienced Promoter-led senior management team with demonstrated execution capabilities

Strategies

• Expand overseas presence and increase our exports especially in the U.S. market through strategic backward integration of production chain and establishing manufacturing capabilities outside of India
• Develop and grow rooftop solar offering
• Capitalize on available market opportunities to grow domestic business
• Expanding and upgrading manufacturing capacities using the latest technology

Industry Outlook

INDIA’S ENERGY TRANSITION TO SOLAR AND REGULATORY POLICIES

Solar energy is a core pillar of India’s low carbon development strategy and a key enabler for Net Zero
achievement by CY2070
India has been at the forefront in taking actions for combating climate change while meeting its development and growth aspirations. Building upon the Prime Minister’s Panchamrit (five nectar elements) pledges at the 26th Conference of Parties (COP26) of the United Nations Framework Convention on Climate Change (“UNFCCC”) in Glasgow, including the target of net-zero emissions by CY2070, India updated its Nationally Determined Contributions (NDC) in August 2022 as follows:
(a)Meet 50% of India’s cumulative electric power installed capacity from non-fossil sources by CY2030.
(b)Reduce the emission intensity of GDP by 45% below CY2005 levels by CY2030.
(c)Put forward and further propagate a healthy and sustainable way of living based on the traditions and values of conservation and moderation, including through a mass movement for LiFE – Lifestyle for Environment as a key to combating climate change.

As India aspires to become carbon neutral by CY2070, low-carbon development of energy systems would be a critical contributor to this journey. To achieve this goal, India is aiming to rapidly expand its renewable energy capacity to 500 GW by CY2030 – Solar would account for 60% of this capacity or 300 GW and the same would be enabled through policy and financial incentives including solar park development, accelerated depreciation on investment, waiver on transmission charges and capital subsidy for residential solar roof-top and agricultural solar pumps.

India is bestowed with 748 GWp of Solar energy potential
India is bestowed with vast solar energy potential. About 5,000 trillion kWh per year energy is incident over India’s land area with most parts receiving 4-7 kWh per square meter per day. Solar PV based power can be harnessed at a utility scale and also on distributed basis to meet demand for power, heating and cooling in both rural and urban areas. This also provides energy security in the current geopolitical scenario due to its abundant availability.

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There has been a visible impact of solar energy in the Indian energy scenario – millions of people have benefitted from solar in Indian villages by meeting their cooking, lighting and other energy needs. Further, solar has emerged as the fastest growing power generation technology.
National Institute of Solar Energy (NISE) has assessed the country’s solar potential of about 748 GWp assuming 3% of the waste land area to be covered by solar PV modules. The top five states namely, Rajasthan, Jammu and Kashmir, Maharashtra, Madhya Pradesh and Andhra Pradesh account for approximately 56% of this potential. At the end of December 2023, India has harnessed roughly 10% of this potential or 73 GW. The top five states in terms of solar capacity additions in the country are Rajasthan, Gujarat, Karnataka, Tamil Nadu and Maharashtra – these five states account for 70% of the solar capacity additions till the end of CY2023.

In terms of percentage of potential achieved, Punjab leads the list with 45.1% achievement, followed by Tamil Nadu (41.7%), Karnataka (38.1%), Gujarat (29.5%) and Haryana (27.2%). These achievements support the country’s vision of sustainable growth while ensuring the country’s energy security.

India stands at 5th position in solar PV deployment across the globe at the end of CY2022
With an installed solar capacity of 63 GW at the end of CY2022, India is the fifth largest solar energy country in the world. China, USA, Japan and Germany are the only four countries that are ahead of India in solar PV deployment. The country has vast solar potential, as most states of India receive sunshine for more than 300 days a year. To harness this potential, the Indian government is constantly churning out policies and initiatives that encourage the shift to solar among the population. The nation is also determined to reduce import dependence in the solar sector and build domestic manufacturing capabilities.

Top 10 solar nations in the world, CY2022

Break up of installed solar capacity, FY2024E, FY2028E

Indian government has taken multiple policy initiatives to boost solar power generation and consumption in the country (Demand-side measures)
Solar energy generation and consumption promotion measure at a glance

SOLAR CELL AND MODULE MANUFACTURING SECTOR IN INDIA

The demand for modules and cells would be much higher than capacity additions due to direct current
(“DC”) overloading factor
To reduce levelized cost of power, it is a common industry practice to pair inverters with over-sized DC module capacity. A 1 MW DC plant rarely produces 1 MW of power as solar modules operate at their maximum efficiency only during peak hours of noon and that too during select months of the year. DC overloading allows the plant to increase generation during non-peak hours. The chart below depicts the requirement for solar modules to meet domestic solar capacity addition targets.

Supply side measures have provided necessary boost to domestic solar module and cell manufacturing sector – Domestic solar module manufacturing capacity has crossed 60 GW in FY2024
Various supply side measures have put the Indian solar manufacturing sector on an accelerated growth trajectory in the last few years. With potential for solar power generation, India is actively developing its cell and module manufacturing capabilities. The country’s module manufacturing capacity has crossed 60 GW mark in November 2023. This positions India as the third largest solar module manufacturer in the world after China and Vietnam.

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A recent announcement from All India Solar Manufacturers’ Association (AISMA) suggests that there are over 100 solar module manufacturers in the country. The top 10 manufacturers have a cumulative manufacturing capacity of 40 GW and the same for the top 25 manufacturers stands at a little over 50 GW. The top 10 module manufacturers in the country are Waaree Energies, Mundra Solar, Renew Power, Vikram Solar, Premier Energies, Goldi Solar, First Solar, Emmvee Group, Rayzon Solar, and RenewSys India, in that order. Premier Energies, the fifth largest module manufacturer in India, had an annual installed capacity of 3.36 GW at the end of FY2024.

Out of the current top 10 solar module manufacturers in the country, only 3 companies i.e. Mundra Solar, Premier Energies and RenewSys have integrated solar module and cell manufacturing facilities. While module manufacturing is more of an assembly process, cell manufacturing, on the other hand, is the most complex process in the solar manufacturing value chain with extensive utilities management. Cell manufacturing is exposed to multitude of risks and attracts three to four times higher investment. In spite of the associated risks and complexities involved, companies like Premier Energies invested in integrated solar cell and module manufacturing to gain greater autonomy on module prices and to tap the booming China+1 import market. Backward integration helped the company to gain access to domestic DCR module market, which requires solar cells and modules to be manufactured in India and additionally, resulting in greater cost control for the company and improved traceability of raw materials. Besides, the company’s integrated status supports its overseas revenue streams especially from countries such as the United States where margins are usually higher than other export destinations.

Additionally, Premier Energies is present in various steps along the solar power value chain from the manufacturing of solar cells to solar modules to providing EPC solutions, O&M services and being an independent power producer. It is one of the first in the Indian solar sector to engage in the backward integration of solar cell manufacturing with solar module production.
Indian solar module consumption market (volume) is poised to grow at 40% CAGR over the next 5 years
After a short dip in FY2023, the Indian solar module consumption market is all set for an accelerated growth over the next 5 years. In volume terms, the consumption of modules in FY2023 was 12.3 GW compared to 17.6 GW a year earlier. The market however bounced back in FY2024 and is expected to close at approximately 28.5 GW. The market is expected to grow further to 67.2 GW by FY2028 on the backdrop of accelerated solar capacity addition planned to achieve 300 GW installed capacity by CY2030.

Solar module and cell price trends in India

Polysilicon is a critical raw material in solar PV manufacturing. Reduction in its price over the years has been a major factor contributing to decline in solar module prices. However, post July 2020, polysilicon price in the global markets increased from $6.8/Kg to $43/Kg in November 2021 (~6 times increment). During Q3 CY2021, several countries including China faced an energy crisis. The main reasons were shortage of coal and associated supply chain disruptions in coal supply. The solar manufacturing industry, still highly concentrated in China, was affected by the rolling blackouts implemented by the government of the energy intensive industries. This crisis compounded an already difficult situation and contributed to increase in module prices in short term.

OVERVIEW OF SOLAR PV MODULE VALUE CHAIN

Solar cell and module manufacturing encompasses five critical processes
Solar PV module manufacturing value chain encompasses five critical processes for transforming raw materials i.e., polysilicon into finished solar panels that are ready for electricity generation. It is a complex and globalized network, with each step contributing to the final product’s cost, performance, and sustainability.
Solar module manufacturing process

Brief description of solar cell and module

Solar cells
A solar cell or photovoltaic cell is an electrical device that converts the energy of light directly into electricity by the photovoltaic effect, which is a physical and chemical phenomenon. It is a form of photoelectric cell, defined as a device whose electrical characteristics, such as current, voltage, or resistance, vary when exposed to light. Individual solar cell devices are often the electrical building blocks of photovoltaic modules. The following key raw materials and components are used in the manufacturing of solar cells:

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• Silicon wafers: Silicon wafers are the key component of solar cells. They are cut from silicon ingots, which are obtained from high-purity silicon. The quality and purity of the silicon are crucial to the performance of the solar cells.
• Silver paste: Silver paste is used to form the conductive contacts on the front side of the solar cells. It is applied using a screen-printing process and is essential for the collection and transfer of the electrical current generated by the silicon wafer.
• Aluminum paste: Aluminum paste is applied to the backside of the solar cell. When fired in a furnace, it forms a back surface field that reflects electrons back into the silicon to be collected as electrical current, enhancing the cell’s efficiency.
• Other gases and chemicals: The production of solar cells involves various gases and chemicals, used in different stages of the process. For instance, dopants such as phosphorus oxychloride are used for n- type doping, while boron may be used for p-type doping. Chemicals are also used for cleaning and etching the wafers, such as hydrofluoric acid to remove the silicon dioxide layer, and other solvents for cleaning purposes.

Solar Modules
A solar module is an assembly of solar or photo-voltaic cells mounted in a framework for installation. Solar panels use sunlight as a source of energy to generate direct current electricity. Our solar modules are currently assembled using monocrystalline and TOPCon cells (currently imported from third party suppliers). The primary raw materials and components used in the manufacture of our solar modules are solar cells. The following key raw materials and components are used in the manufacturing of solar modules:

• Backsheet: A backsheet provides for mechanical strength, electrical isolation, moisture resistance and internal reflection. It forms a direct current insulation layer between the solar cell and the installers and provides protection against shock. It is also impervious to ultraviolet rays and moisture and acts as a barrier to external temperature and humidity changes which could affect the solar cells and diminish the performance of the solar module. Further the innermost surface of the backsheet ensures that in order to give the photons the ability to generate electricity, they are reflected back towards the cell. In addition, it adheres to the encapsulant and holds the entire cell assembly in place for prolonged periods.
• Encapsulant: The encapsulant helps in transmittance of light, holding the cell assembly together, and adhering to glass and backsheet. The transmittance of all light that falls on it is essential to ensure that the cell assembly inside gets adequate photons to generate power output. It also holds the cell assembly together in a manner that the solar cells do not touch each other and get short-circuited through the use of gel content (for elastomers) and also helps limit shrinkage. Gel content of the encapsulant ensures that they have adequate intermolecular strength which could hold the module together. Encapsulants generally have a tendency to shrink at high laminating temperatures which is required to be limited to ensure that there are no misalignments of strings and/or cell short circuiting. In addition, it is also important that they adhere adequately to the glass on front side and backsheet at the back side of solar module and are stable at elevated temperatures and high ultraviolet exposure for prolonged periods.
• Glass and other auxiliary products: The glass in the solar modules enables transmission while minimizing reflection, provides mechanical strength and rigidity as well as compositional stability. It is the first surface that the light interacts with and therefore it is extremely important that it transmits the light to maximum level while lowering the reflection off its surface. In its natural form, the glass reflects four to 10% of the incident light on it, which may lead to notable loss of power output. Therefore, the glass is coated over the front surface with an anti-reflective coating which ensures that such reflection is minimized to as low as 1% in many cases. In addition, the glass is tempered and expected to provide mechanical strength and rigidity to the solar module against external weather, shocks, etc. It is important that only solar glass with specific components be used in solar modules so as to ensure stability throughout its lifetime. In addition to solar cells, other raw materials or components required for the manufacture of solar modules include the backsheet, the encapsulant and glass as well as aluminum frames, ribbon, and junction box.

Solar cell technology is moving from polycrystalline silicon (poly-Si) to PERC to more efficient TOPCon and HJT technologies
The solar cell industry has undergone a remarkable transformation, driven by a constant quest for efficiency and cost-effectiveness. Initially, poly-Si dominated the market, offering a simple and affordable solution. However, its ability to convert sunlight into electricity was limited. A significant breakthrough occurred with the introduction of PERC technology. PERC cells address the efficiency limitations of poly-Si by incorporating surface texturing and passivating layers on both sides. These features enhance light capture and reduce electron loss, leading to a significant boost in efficiency. This shift towards PERC had propelled the industry forward, enabling the production of more powerful and cost-competitive solar panels. Monocrystalline PERC technology is an advanced technology used to increase the efficiency of standard solar modules. The electrons that form an electric current in the solar cells have greater room to move because the cells are made up of a single crystal. As a result, the solar cells are significantly more efficient. These high-end solar cells are space efficient and long lasting and have a more streamlined appearance.

Premiere Energies established a 75 MW capacity solar cell manufacturing line in 2011 before becoming one of the first companies in India to manufacture solar cells at scale. The company achieved this through the introduction of a solar cell line with annual installed capacities of 500 MW in FY2021 and 250 MW in FY2022.
The solar technology landscape is witnessing an active transformation, with numerous next-generation panels showcasing cutting-edge photovoltaic cell designs and advancements. These innovations are collectively driving improvements in efficiency, degradation resistance, and overall reliability. Following the PERC breakthrough, the latest solar PV cell technologies are TOPCon and HJT. The below table compares these technologies on various parameters.

Premier Energies Business Data

Premier Energies Verticals

• Solar Cell
• Solar Module

Premier Energies Market Share

• India’s second largest integrated solar cell and module manufacturer as well as India’s second largest solar cell manufacturer in terms of annual installed capacity with 2 Gigawatts (“GW”) for cells and 3.36 GW for modules.

Premier Energies wise break-up

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Premier Energies Revenue contribution from Geography presence

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Premier Energies Customer dependency

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Premier Energies Capacity Utilisation

Premier Energies

key customers across business offerings include several IPPs, original equipment manufacturers (“OEMs”) and off-grid operators such as National Thermal Power Corporation Limited (“NTPC”), TATA Power Solar Systems Limited, Panasonic Life Solutions Private Limited (“Panasonic”), Continuum Green Energy (India) Private Limited (“Continuum”), Shakti Pumps (India) Limited (“Shakti Pumps”), First Energy 6 Private Limited, a Thermax Group Company (“First Energy”), Bluepine Energies Private Limited, Luminous Power Technologies Private Limited (“Luminous”), Hartek Solar Private Limited (“Hartek”), Green Infra Wind Energy Limited (a subsidiary of Sembcorp Green Infra Limited), Madhav Infra Projects Limited (“Madhav”), SolarSquare Energy Private Limited (“SolarSquare”) and Axitec Energy India Private Limited (“Axitec”).

Premier Energies Peer companies comparison

Premier Energies Subsidiary companies

• Direct Subsidiaries
  • Premier Energies Photovoltaic Private Limited (“PEPPL”)
  • Premier Energies International Private Limited (“PEIPL”)
  • Premier Energies Global Environment Private Limited (“PEGEPL”)
  • Premier Solar Powertech Private Limited (“PSPPL”)
  • Premier Photovoltaic Gajwel Private Limited (“PPGPL”)
  • Premier Photovoltaic Zaheerabad Private Limited (“PPZPL”)
  • Premier Energies Photovoltaic LLC (“Premier USA”)
• Indirect Subsidiaries
  • IBD Solar Powertech Private Limited (“IBD Bangladesh”)
• Joint Ventures
  • Mavyatho Ventures Private Limited (“MVPL”)
  • Brightstone Developers Private Limited (“BDPL”)

Premier Energies Group companies

• AKR Constructions (Solar) Private Limited
• Benten Developers Private Limited
• Brightstone Developers Private Limited
• Mavyatho Ventures Private Limited
• Niyathi Madasu Advisory Inc.
• PCS Premier Energy Private Limited
• Premier Lords Private Limited
• Primepack Supports Private Limited
• Renovar Energy Private Limited
• Saimeg Infrastructure Private Limited
• Svarog Global Power Private Limited
• Vensol (Bidar) Energy Private Limited*
• Vensol (Hubli) Energy Private Limited

Premier Energies SWOT ANALYSIS

• Strengths
  • Strong Manufacturing Capabilities: Premier Energies has a significant production capacity with 2 GW for solar cells and 3.36 GW for solar modules, positioning them as a major player in the solar industry.
  • Innovative Technology: The company is investing in advanced technologies like TOPCon cell and module lines, which can enhance efficiency and performance.
  • Sustainability Initiatives: Premier Energies is committed to environmental sustainability, with advanced water recycling systems and LEED Gold Certified facilities.
  • Reputation and Recognition: The company has been recognized for its excellence in innovation and sustainable energy solutions.
• Weaknesses
  • High Dependence on Solar Market: Being heavily focused on solar energy, the company is vulnerable to market fluctuations and policy changes in the renewable energy sector.
  • Capital Intensive: The solar manufacturing industry requires significant capital investment, which can be a financial strain, especially during economic downturns.
  • Geographical Concentration: With primary operations based in India, the company may face risks related to regional economic and political instability.
• Opportunities
  • Growing Demand for Renewable Energy: The global shift towards renewable energy presents significant growth opportunities for Premier Energies.
  • Technological Advancements: Continued investment in R&D can lead to the development of more efficient and cost-effective solar technologies.
  • Expansion into New Markets: There is potential for expanding operations and sales into international markets, diversifying their geographical presence.
  • Government Incentives: Various government policies and incentives for renewable energy can provide financial benefits and support growth.
• Threats
  • Intense Competition: The solar industry is highly competitive, with many players vying for market share, which can impact pricing and profitability.
  • Regulatory Changes: Changes in government policies and regulations related to renewable energy can affect operations and profitability.
  • Supply Chain Disruptions: Dependence on global supply chains for raw materials and components can pose risks, especially during geopolitical tensions or pandemics.
  • Technological Obsolescence: Rapid advancements in technology can render existing products and technologies obsolete, requiring continuous innovation and investment.

Premier Energies Business risk factors

• Revenue from operations is dependent upon a limited number of customers and the loss of any of these customers or loss of revenue from any of these customers could have a material adverse effect on business, financial condition, results of operations and cash flows.
• Manufacturing facilities are located in the state of Telangana, India, which exposes operations to potential risks arising from local and regional factors which may adversely affect operations and in turn business, results of operations and cash flows.
• An increasing amount of income is derived from our export of solar modules and cells which we are in the process of expanding. Such expansion plans and exports may be dependent on the policies passed by the governments of export countries and any unfavorable change in such policies may adversely affect our business.
• May be unable to benefit from government policies like the Modified Special Incentive Package Scheme, Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors and various other policies.
• Premier Energies derive a significant amount of revenue from only two product categories namely, solar cells and modules, and therefore their continued success is necessary for our business and prospects.

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Premier Energies Financials

Premier Energies Key Financial Ratios

Premier Energies Key Performance Indicators

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Premier Energies Balance Sheet

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Premier Energies Profit & Loss

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Premier Energies Cash Flow

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Premier Energies Capital structure

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IPO Details

Premier Energies IPO Details

Object of the issue

(in ₹ million)

Litigation involved

Gray Market Premium

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