Competitive Strengths

Leading Indian supplier and exporter of cryogenic equipment and solutions
INOX India is a prominent manufacturer of cryogenic equipment and one of the leading cryogenic tank manufacturers in the world by revenues in 2021. In Fiscal 2022, they were the largest supplier of cryogenic equipment in India by revenues in Fiscal 2022 with four times the sales of the second largest player in the domestic market.

The nature of the industry requires specialized handling and technologically intensive solutions. Their range of cryogenic equipment spans the entire cryogenic value chain in their focus sectors. Their investment in product development and engineering allows them to customize their equipment and systems to meet the customers’ requirements; and their presence in the industry for over 30 years with an established brand and a reputation for consistent quality of their products. The company intends to leverage these competitive advantages and its global customer base to continue to capitalize on growth in demand for cryogenic storage tanks and equipment.

Large portfolio of specialized cryogenic equipment engineered to global quality standards.
The company offers comprehensive solutions across design, engineering, manufacturing, and installation of standard as well as customized cryogenic equipment and systems. Their equipment and systems are used in various industries. The company has developed and commercialized products and services spanning the entire cryogenic value chain in industrial gases, LNG liquefaction plants, and liquid hydrogen.

The company’s products require specialized engineering, industry certification, and customer acceptance because of the extremely low cryogenic temperature and volatile nature of the gases that their equipment stores and handles. Due to their engineering expertise, quality product offering, and customer service, they have developed a reputed brand, INOXCVA, in the cryogenic equipment industry. In Fiscal 2023 they have Installed a Capacity of 3,100 Equivalent Tank Units (which are cryogenic storage tanks of 10,000 litres), 2.4 million disposable cylinders, and 14 certifications from the United States, Europe, Australia, and other international markets.

Diversified domestic and international customer base across industry sectors.
The company provides cryogenic storage, distribution, and transportation equipment and systems to corporate and government customers. They have a diversified end-industry mix with customers in industries such as energy, industrial gases, LNG and LCNG, steel, medical and healthcare, chemicals and fertilizers, pharmaceuticals, aviation and aerospace, pharmaceuticals, and construction, amongst others. They provided their equipment and systems to over 1,201 domestic customers and over 228 international customers across the 3 divisions.

Industrial Gas Division: Air Liquide Global E&C Solutions India Private Limited, All Safe Global, Baif Development Research Foundation, CRYONiQ s.r.o., Gulf Cryo LLC, Hyundai Engineering and

Construction Co Ltd, INOX Air Product Pvt Ltd, Carbacid (CO2) Limited, Navin Flourine International Ltd, National Refrigerants Inc, Pentrade Global LLC, Prodair Air Products India Pvt Ltd, SK ecoengineering Co. Ltd, StemCyte India Therapeutics Pvt Ltd, Synergy Gases ( K ) Ltd.

LNG Division: Caribbean LNG Inc, 2G Energy Inc, AGP City Gas Pvt Ltd, H-Energy Gateway Pvt. Ltd., Hoglund Gas Solutions AS, IRM Energy Limited, Saint Gobain India Private Limited, Shell Energy India Private Limited; Think Gas Distribution Private Limited, Ultra Gas & Energy Limited; and

Cryo Scientific Division: ISRO

Strong product development and engineering focus
The foundation of the company is based on product development and engineering. They have an in-house engineering team to develop new products and solutions. In the past 3 fiscal years, their in-house team has developed cryogenic containers that comply with ISO container standards, LNG fuel stations, LNG/LCNG fuel stations, LNG fuel tanks, cryogenic biological storage, and beverage kegs. During the last five years, they have added new products: liquid hydrogen storage tanks, LNG dispensers, LNG fuel tanks, and aluminium trailers.

Product development and engineering activities are critical in maintaining a competitive position, addressing customer needs and industry developments. They are focused on developing newer technologies, engineering new products, reducing the cost of production, simplifying manufacturing processes, improving safety, and reducing the environmental impact of manufacturing and products. Their cryogenic pressure vessels comply with international standards and requirements.

A robust order book lends earnings visibility.
As of September 30, 2023, the company’s Order Book was ₹1,036.61 crore. The “Order Book” comprises anticipated revenues from the unexecuted portions of existing contracts (which are accepted contracts for which all pre-conditions have been met). They are led by a qualified and experienced management team that has the expertise and vision to manage and grow their business. The company commissioned its Kalol facility in Fiscal 1992 and has undergone organic and inorganic growth to become a global cryogenic equipment solution provider. They are part of the INOX group (including companies in the industrial gas sector) with revenues of over ₹3,176.03 crore in Fiscal 2023.

Key Risks & Concerns

Revenue concentration – The Company derives 11.56% and 46.52% of revenues from its largest customer and top 10 customers respectively as of Fiscal 2023. Cancellation by customers or delay or reduction in their orders could have a material adverse effect on their business, results of operations, and financial condition.

Increase in key raw material prices – Any significant increase in key raw material costs or input costs may adversely affect the pricing and supply of its products and hurt their business and financial performance.

Outlook and Valuation

Inox India is the largest supplier of cryogenic equipment in India by revenue in Fiscal 2023. Inox India has over 30 years of experience offering solutions across design, engineering, manufacturing, and installation of equipment and systems for cryogenic conditions. The demand for cryogenic equipment across geographies is expected to be driven by the increased demand for cleaner fuels such as LNG and hydrogen due to the global focus on reducing carbon emissions from conventional energy sources.

Citing strong growth prospects, marquee relationship with its customers, superior return ratios, strong financial performance, healthy demand, robust order book, strong product portfolio catering to different segments, diversified customer base, no competition, and attractive valuations, inox india is well positioned to capture this global market growth with in-house technology as well as LNG product range that includes the entire value chain. In hydrogen, its engineering teams are developing products and systems in complex industry environments like hydrogen storage, transportation, and distribution to address the need for large-scale movements of liquid hydrogen.

The IPO is valued at 38x FY23 (EPS – Rs.16.83) which appears reasonable. Hence, we assign a SUBSCRIBE rating to the issue.

Key Information

Use of Proceeds:
The total issue size if Rs.1459.32 cr. The entire amount is an Offer for Sale. Further, the Company expects that the proposed listing of its Equity Shares will enhance the visibility and brand image as well as provide a public market for the Equity Shares in India. The money will go directly to the selling shareholders. The company will not receive money from OFS.

Book running lead managers:
Axis Capital and ICICI Securities

Management:
Pavan Kumar Jain (Chairman and Non- Executive Director), Siddharth Jain (Non-Executive & Non-Independent Director), Ishita Jain, Amit Advani, Girija Balkrishnan, Richard Boocock, Srikant Somani (Non-Executive and Independent Director), Parag Kulkarni (Executive Director), Pavan Logar (Chief Financial Officer), Deepak Acharya (Chief Executive Officer).