Indowind Energy Ltd: Some thoughts

Introduction: Indowind Energy Limited develops wind farms for sale, manages the wind assets, and generates Green Power for sale to utilities and corporates. 

It also does turnkey implementation of Wind Power Projects, from concept to commissioning. It also undertakes Wind Asset Management Solution for installed assets, including operations, billing, collection of revenue to project customers. Supply of Green Power to Customers. It is also into CERs (Carbon Credit) Sales and Trading.

Rights Issue and other details: 1st let me start with Carbon Credits, Indian companies have registered 1,669 projects under CDM and earned 246.6 million credits; another 526 projects were registered under the ‘voluntary’ market and these have earned 89 million credits. Thus, in all, Indian companies got roughly 350 million credits.

To begin with, Indian enterprises registered 1,669 projects under the CDM and earned 246.6 million credits; another 526 projects were registered under the 'voluntary' market and received 89 million credits. Thus, Indian firms received approximately 350 million credits in total. These credits are known by different names in different jurisdictions. They are known as 'certified emission reductions,' or CERs, under the CDM.

It is subject to market price, much like stocks. At its peak, they were selling for $25 per CER. Indowind Energy Ltd (Rs.18.10), a wind energy startup based near Chennai, sold some for $15 each. Back then, experts projected that India may profit up to Rs 45,000 crore by selling the credits.

The market then dropped. A CER was valued worth 25 cents in the CDM market and a $1 in the voluntary market in the beginning of last year (2022).

Q. What are Carbon Credits or CERs and are their current prices?

A successful approach for lowering greenhouse gas (GHG) emissions is critical to the success of climate change policy. Policymakers and businesses use carbon pricing to reduce GHG emissions by putting a price on carbon.

Climate change is no longer regarded as a'soft' political issue, because of overwhelming scientific evidence, linking manmade emissions from fossil fuels, such as carbon dioxide and methane, to global warming. Since its inception in the early 1990s, carbon pricing has become an increasingly prominent method in global environmental policy for decreasing GHG emissions.

One carbon credit certifies that one metric tonne of carbon dioxide has been removed from the atmosphere.

Most prices of carbon credits are below the $40-80 per metric ton of carbon dioxide emitted needed to keep global warming within a 2-point degree, as declared by the Paris agreement.

The World Bank’s latest State and Trends of Carbon Pricing report reveals that carbon prices have risen sharply in the past year, and this is mostly due to increased demand as decarbonization efforts accelerate.

“For the first time, the total value of the voluntary carbon market exceeded more than US$1 billion in November 2021,” the report says. “This rapid increase in value reflects both rising prices and rising demand from corporate buyers leading to higher transacted volumes.”

According to the authors, global average carbon credit prices on the voluntary market moved from US$2.49/tCO2e in 2020 to US$3.82/tCO2e in 2021, and the volume of credits transacted in the voluntary market exceeded 362 million credits last year, 92% more than in 2020.

This growth in demand and upward price trend is attracting investors, who are starting to see carbon credits as an investment product that is set to bring.

So, if the price of CERs shoot up further the companies like Indowind Energy Ltd (Rs.18.10) will make windfall gains.

Q. Why was trading restricted in the scrip of Indowind Energy Ltd?

Ans: It is due to the delay in putting up the notice of a stay in NCLT hearing in the BSE/NSE website. According to my sources the date has been shifted to 23 January, 2023. 

Hence, the investors should not get rattled by the sudden move of the stock exchanges. Thi is just a normal process and there's absolutely NO PROBLEM in the fundamentals of the company.

Infact, post successful implementation of the Rights Issue, the company will almost certainly become DEBT FREE.

Q3FY23 Results:

Indowind Energy Ltd (Rs.18.10) came out with superb December, 2022 quarter Results, when the EPS jumped to ₹0.01 vs ₹0.024 loss in 3Q 2022.

Key Financials:

💥Revenue: ₹75.7m (up 80% from 3Q 2022).

💥Net income: ₹1.43m (up from ₹2.16m loss in 3Q 2022).

💥Profit margin: 1.9% (up from net loss in 3Q 2022). The move to profitability was driven by higher revenue.

💥EPS: ₹0.01 (up from ₹0.024 loss in 3Q 2022).

Source: Simply Wall.

Conclusion: The dates of the proposed Rights Issue has not been changed. Hence, those who want to subscribe to the Right Issue of Indowind Energy Ltd (Rs.18.10) should hold the shares upto the record date mentioned by the company on the BSE website.

Fortunately, the company is moving in the right direction and the prudent investors should do well to accumulate the scrip in market dips.