1. At a priceband of 32/- the promoters (who own 97.6% of the stock) are divesting 33% of their equity (indirectly). Which means that even before the company makes a penny, the promoter is able to get his entire investment back.
2. Not only the company is new, but also the promoter has no track record of managing a publicly listed company. so the uncertainity and risks are high. Even the company appointed auditors were uncomfortable with the fact that the top management paid itself 5.1Cr out of the total salary expenses of 8.1Cr. They felt that for a loss making company this level of remuneration is too high.
3. Phase 1 of the company got operational in July 2009, Phase 2 in March 2010 which brings the entire installed capacity to 160MW/annum. The company has order books 1000 cr or 170MW of which only 171cr/31MW is executed. So this brings the utilization factor of about 40%. Now the question is why would a company go for expansion of another 100MW before it is able to fully utlize its existing capacity or has received orders which would help it do so.
4. Indian listed companies which have invested heavily in solar energy are Websol Energy, Moser Baer and XL Telecom. Unfortunately none of them have done too well. Also globaly there is an oversupply of solar cell manufacturing capability.
Bad ipos with poor fundamentals being subscribed is according to me a harbinger of a major crash/correction.
I recently wrote an article about Gujarat Pipav port. IndoSolar is also another IPO which falls in the same category. I just hope it gets oversubscribed, which means that I should short NIFTY in a big way.