Inox India (InoxCVA), an Inox Group company, offers solutions across design, engineering, manufacturing and installation of equipment and systems for cryogenic conditions with over 30 years of experience. Its offering includes standard cryogenic tanks and equipment, beverage kegs, bespoke technology, equipment, and solutions as well as large turnkey projects which are used in diverse industries such as industrial gases, liquified natural gas (LNG), green hydrogen, energy, steel, medical and healthcare, chemicals and fertilizers, aviation and aerospace, pharmaceuticals, and construction. In addition, it also into manufacture of a range of cryogenic equipment utilized in global scientific research projects.

Cryogenic engineering is specialized due to ultra-low temperatures where permanent gases such as oxygen and nitrogen are in liquid form. Thus, its products require specialized engineering, industry certification and customer acceptance because of the extremely low cryogenic temperature and volatile nature of the gases that its equipment stores and handles. Due to its engineering expertise, quality product offering and customer service, the company has developed a brand, InoxCVA, in the cryogenic equipment industry.

The company exports its products and services to 66 countries including some key geographies such as United States, Saudi Arabia, the Netherlands, Brazil, Korea, United Arab Emirates, Australia, and Bangladesh. Exports accounted for 45.83% (USA 15.89%, Norway 3.46%, Saudi Arabia 2.85%, Japan 2.53%, others 21.11%) and 62.18% of revenue for FY2023 and H1FY2024, respectively.

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 focus on reducing carbon emissions from conventional energy sources.

The company is well positioned to capture this global market growth with its in-house technology as well as its LNG product range that includes the entire value chain.

In hydrogen, the 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.

It is the first Indian company to manufacture a trailer mounted hydrogen transport tank, which was designed jointly with the Indian Space Research Organisation (ISRO). It produced and shipped a 238kl liquid hydrogen storage tank for a liquid hydrogen plant in South Korea. It recently produced and shipped four 311kl liquid hydrogen storage tanks for another customer in South Korea for the construction of three liquid hydrogen plants.

The business operations of the company comprise three divisions:Industrial Gas, LNG, and Cyro Scientific. Of the FY2023 revenue from operations, about 70.88% came from industrial gases, 24.89% from LNG, and 4.23% from cryoscientific. In H1FY2024, it was 64%, 30.53% and 5.47%, respectively.

The Industrial Gas division manufactures, supplies and installs vacuum insulated cryogenic tanks and systems for storage, transportation, and distribution of industrial gases like such as green hydrogen, oxygen, nitrogen, argon, carbon dioxide (CO2), hydrogen and provides after-sales services. The company designs and manufactures customized cryogenic storage tanks and systems for its customers’ requirements as well as standard storage tanks in accordance with industry standards. Its storage tank offerings include stationery storage tanks from 1,000 litre to one million litre capacity, portable storage tanks from 1 litre to 1,000 litre capacity, and transport tanks and tankers/trailers up to 60,000 litre capacity. Its product line also includes vaporizers of various types and skid mounted piping skids for pumping and regasification. It also provides engineering, procurement, and construction (EPC) services for cryogenic solutions including bulk storage and regasification equipment, typically associated with petrochemical or steel projects. The company currently manufactures beverage kegs using the NSF-certified stainless-steel material and is implementing the project by entering technology and marketing alliances with international industry players.

The LNG division manufactures, supplies, and installs standard and engineered equipment for LNG/LCNG storage, distribution, and transportation as well as small-scale LNG infrastructure solutions suitable for industrial, marine, and automotive applications. LNG division offerings include static storage tanks up to one million litres capacity, transport trailers, LNG satellite stations for industrial users, marine fuel tanks, LNG and LCNG fuel stations and LNG vehicle fuel tanks. In the LNG tank segment, it has supplied over 60% of the tanks in both the stationary tank segment which includes all LNG applications including LCNG stations and trailer mounted mobile LNG tanks in India which have a valid PESO license as of May 4, 2022. It also offers operation and maintenance for its LNG solutions.

The Cryo Scientificdivision provides equipment for technology intensive applications and turnkey solutions for scientific and industrial research involving cryogenic distribution. Its activities are focused on customized cryogenic storage and distribution systems for space research, cryogenic fuel filling systems for launch pads, space simulation chambers; vacuum jacketed piping and cryostat for magnetic resonance imaging (MRI) magnets. The company is one of the few Indian companies in the International Thermonuclear Experimental Reactor (ITER) project, which is an international nuclear fusion research and engineering megaproject.

Large turnkey projects (ticket size of over Rs 5 crore) accounted for 28.68% and 45.77% of the revenue from operations in FY2023 and H1FY2024, respectively.

The company has a diversified customer base across industry sectors and geographies. And it provides its cryogenic storage, distribution and transportation equipment and systems to corporate and government customers. The company derived 4.70% and 13.02% of its revenue from operations in H1FY2024 and FY2023 from Government customers. It has 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. Further, it has provided equipment and systems to over 1,201 domestic customers and over 228 international customers across its three divisions during the 2021-23 period. Revenue from repeat customers accounted for 48.63% in FY2023 (51.24% in FY2022) of the revenue from operations. Further, the top 10/20 customers accounted for 46.52%/60.55% of the revenue from operations in FY2023 with the largest customer accounting for 11.56%.

It has three manufacturing facilities located at (i) Kalol in Gujarat, (ii) the Kandla Special Economic Zone (Kandla SEZ) in Gujarat, and (iii) Silvassa in the Union Territory of Dadra and Nagar Haveli. The installed capacity of cryogenic tanks (and related items) was 3,100 Equivalent Tank Units (which are cryogenic storage tanks of 10,000 litres) and disposable cylinders were2.4 million numbers in FY2023. The capacity utilization of cryogenic tanks and disposable cylinders in FY2023 stood at 70.06% and 83.23%, respectively.

The issue and object

The current initial public offer is only an Offer for Sale of up to 22110955 equity shares. The OFS comprisesthe promoters’21637355 equity shares [ Siddharth Jain 10437355 equity shares, Pavan Kumar Jain 5000000 equity shares, Nayantara Jain 5000000 equity shares and Ishita Jain 1200000 equity shares]; promoter group’s(classified as OSS) 420000 equity shares [ Manju Jain 230000 equity shares, Latha Rungta 190000 equity shares], and other selling shareholders’ 53600 equity shares [Bharti Shah 13400 equity shares, Kumud Gangawal 13400 equity shares, Suman Ajmera 13400 equity shares and Rajni Mohatta 13400 equity shares]. Post-issue, Manju Jain will and Latha Rungta will hold 0.76% and 0.63% stake, and Bharti Shah, Kumud Gangawal, Suman Ajmera and Rajni Mohatta will hold 0.04% stake each.

The object of the issue is to achieve the benefits of listing the equity shares on the Stock Exchanges.

Strengths

Growing demand for cleaner fuels such as LNG and hydrogen due to focus on reducing carbon emissions from conventional energy sources to drive demand for cryogenic equipment across geographies.

Leading player in cryogenic equipment industry, with a reputed brand name, InoxCVA. Indian supplier and exporter of cryogenic equipment and solutions. By revenue, the company was the largest supplier of cryogenic equipment in India as well as the largest exporter of cryogenic tanks from India in FY2023.

The wide range of cryogenic equipment spans the entire cryogenic value chain in focus sectors as well as customized equipment (and systems), with investments in product development and engineering.

The order book (unexecuted portions of existing contracts) end of September 30, 2023, stood at Rs 1036.609 crore, which works-out to about 0.99 times of its sales for TTM period ended September 2023. Of the order book, 52.8% are for the Industrial Gas division, 25.2% for the LNG division, and 22% for the Cryo Scientific division.

The company has a diversified customer base across industry sectors and geographies.Revenue from repeat customers accounted for 48.63% in FY2023 (51.24% in FY2022) of the revenue from operations.

Weakness

The Top 1/10/20 customers accounted for 11.56%/46.52%/60.55% of the revenue from operations in FY2023 and, thus, a significant client concentration. Cancellation by customers or delay or reduction in their orders could have a material adverse effect on the business of the company.

The company does not own the name Inox but is permitted to use the same under license agreement by the promoters on annual royalty payment.

Exports may hit due to tariffs and trade barriers and international sanctions.

Certain members of the Promoter Group have not consented to the inclusion of, nor have they provided, information or any confirmations or undertakings pertaining to themselves, which are required to be disclosed in relation to the Promoter Group under the SEBI ICDR Regulations in the RHP.

Disposable cylinders and Cryoseal as products have cyclical demand. The company is also affected by the Industrial Gas industry capex cycles.

Contingent liability as of end September 30, 2023, stood at Rs 169.717 crore, which is 16.3% of the sales for the TTM period ended September 2023.

Valuation

Consolidated re-stated sales of the company for the fiscal ended March 2023 (FY 2023), were up 23% to Rs 965.90 crore. With the operating profit margin contracting by a marginal 20 basis points (bps) to 21.2%, the operating profit was up 22% to Rs 204.35 crore. Eventually, the PAT was up 24% to Rs 152.71 crore.

For the TTM period ended September 2023, sales were Rs 1043.72 crore and PAT was Rs 172.63 crore. The EPS for FY2023 was Rs 16.8. The EPS for TTM period ended September 2023 was Rs 19 and the P/E works out to 34.7 times. ThePrice/BV works out to 10.8 times.

There are no comparable listed peers with a similar line of business. Everest Kanto Cylinders quotes at a P/E of 17.4 times its consolidated EPS for TTM ended September 2023.