India’s Biggest Solar Panel Maker Waaree Energies’ IPO Delayed Over Deemed Public Offer Non-Compliance
Waaree Energies, India’s largest domestic solar panel manufacturer, is facing delays in its initial public offering (IPO) due to issues related to deemed public offer non-compliance under the Companies Act. Despite filing its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) on December 29, 2023, the company has yet to receive approval, even eight months later.
The crux of the delay stems from a specific provision of the Companies Act, which mandates that an unlisted company cannot offer its shares to more than 200 individuals in a financial year without transitioning to a public offering. This regulation is intended to prevent companies from circumventing the public offer requirements by offering shares to a large number of investors without proper oversight.
Sources close to the matter revealed that Waaree Energies had engaged in pre-IPO funding rounds, during which investors subsequently sold shares to high net-worth individuals (HNIs) and family offices, inadvertently breaching the 200-investor ceiling. Specifically, Waaree raised Rs 1,000 crore in a funding round led by investment firm ValueQuest in August 2023, following a previous round that brought in Rs 1,040 crore from various investors, including family offices and HNIs.
The complications arising from this breach have significantly stalled the IPO process. As reported by Moneycontrol on May 14, several companies, including Mobikwik, have encountered similar delays in obtaining SEBI approval due to violations of the deemed public offer norms. In Waaree’s case, the issue arose not because the company directly offered its shares to more than 200 people, but because existing shareholders sold down their stakes to a wider group of investors, thereby triggering the non-compliance.
Waaree Energies’ DRHP disclosed that the company had 2,673 individual public shareholders who collectively held a 27.68 percent stake in the company. This large number of shareholders was a significant factor in SEBI’s decision to withhold approval for the IPO. According to SEBI’s latest IPO processing status update, the regulator sought clarifications from Waaree’s bankers on May 21, but is still awaiting a response from the company and its financial partners.
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Given the nature of the non-compliance, it appears that Waaree will need to resolve this issue with the Registrar of Companies (RoC) and the Ministry of Corporate Affairs (MCA). This could involve paying a penalty for the breach, but the process is expected to be time-consuming, requiring multiple layers of approval from the MCA. This has led to significant delays in the IPO timeline, with no clear resolution in sight.
Despite multiple attempts to seek clarity, Waaree Energies has not provided an official response to the ongoing situation.
Waaree Energies had planned to raise Rs 3,000 crore through the IPO, with the proceeds earmarked for part-financing the establishment of a 6 gigawatt (GW) ingot wafer, solar cell, and solar photovoltaic module manufacturing facility in Odisha. The total project cost exceeds Rs 9,000 crore, making it a significant expansion for the company.
As of June 30, 2023, Waaree Energies had an installed capacity of 12 GW, making it the largest solar module manufacturer in India. The company operates four manufacturing facilities in Gujarat, spread over 136.30 acres, located in Nandigram, Surat, Tumb, and Chikhli.
Financially, Waaree Energies has shown strong growth, with revenue increasing to Rs 6,750.87 crore in fiscal 2023, up from Rs 2,854.26 crore in the previous year. The company also reported a profit of Rs 500 crore for fiscal 2023, a significant rise from Rs 79.6 crore in the previous year.
The delay in the IPO has put a temporary hold on Waaree’s ambitious expansion plans, but the company remains a key player in India’s rapidly growing solar energy sector. How it navigates the regulatory hurdles will be closely watched by industry stakeholders and potential investors alike.
