Waaree Energies ₹4,321 Cr IPO Sees 3.47x Oversubscription on Day 1—10 Key Risks You Must Know Before Investing

Waaree Energies’ ₹4,321 crore IPO opened for bidding on October 21 and will remain available to investors until October 23. The company aims to raise this amount through a combination of a fresh issue worth ₹3,600 crore and an offer for sale (OFS) of ₹721.44 crore. The IPO has already received strong demand, being oversubscribed 3.47 times on the first day.

Investors should be aware of the risks mentioned in the company’s Draft Red Herring Prospectus (DRHP). These include:

1. Dependence on the U.S. Market: Waaree’s growth relies heavily on export sales to the U.S., which accounted for nearly 99% of its export revenue in FY23. Any policy changes in the U.S. could severely impact its financial performance.
2. Policy and Regulatory Risks: The company is vulnerable to changes in government support for renewable energy. A reduction in these incentives could negatively affect its operations.
3. Solar Module Pricing Volatility: Prices of solar modules have been volatile, and a sudden drop could reduce profit margins. Despite mechanisms to limit risk, unexpected price changes could affect revenue.
4. Material Cost Fluctuations: Waaree relies on external suppliers for key materials like solar cells. Any price increases could hurt the company’s profitability.
5. Customer Concentration Risk: The company relies heavily on a few key customers, meaning a loss of any of them could harm its revenue.
6. Import Duties and Restrictions: Waaree depends on imported materials, especially from China. High customs duties or import restrictions could increase production costs, affecting profitability.
7. Competition in the Solar Industry: Waaree faces stiff competition, which could pressure prices and reduce market share.
8. Exchange Rate Fluctuations: The company deals heavily in foreign currencies, making it vulnerable to currency exchange risks.
9. Legal Challenges: Waaree and its group companies are involved in several ongoing legal disputes, which could impact its financial position.
10. Past Legal Non-Compliance: Some of Waaree’s group companies have previously failed to meet regulatory requirements, posing a risk to the company’s reputation.

Potential investors should carefully consider these risks before investing.