Waaree Energies Faces Prolonged IPO Delay Due to Compliance Issues

Waaree Energies, India’s leading solar panel manufacturer, finds itself in a prolonged wait for regulatory approval of its Initial Public Offering (IPO), nearly eight months after submitting its draft papers. The Securities and Exchange Board of India (SEBI) has yet to greenlight the share sale, citing concerns related to potential non-compliance with the Companies Act. This act restricts unlisted firms from selling shares to more than 200 individuals without initiating a public offer. The delay is primarily attributed to violations related to this rule, according to insiders familiar with the situation.

The Chain of Events Leading to the Delay

The solar giant submitted its draft IPO documents on December 29, 2023. Following this, Waaree Energies secured funds through pre-IPO rounds. However, complications arose when investors in these rounds began selling shares to other entities, including high-net-worth individuals (HNIs) and family offices. This activity led to the company unintentionally breaching the 200-investor limit set for unlisted companies, as per sources who requested anonymity.

Significant Fundraising Amidst Regulatory Scrutiny

In August 2023, Waaree Energies successfully raised Rs 1,000 crore through a funding round led by ValueQuest, an investment firm. Prior to this, the company had also secured Rs 1,040 crore from various investors, including family offices and HNIs. These fundraising efforts, while financially beneficial, inadvertently complicated the company’s path to IPO approval due to the subsequent resale of shares by these investors.

Industry-Wide Challenges with Regulatory Compliance

Waaree’s challenges are not isolated; similar issues have delayed IPO approvals for other companies, including Mobikwik. These delays stem from violations of deemed public offer norms, where existing shareholders sell their stakes, causing a breach in compliance rather than the companies themselves directly offering shares to a large number of investors. This situation, however, places the onus on the companies to address the compliance issues.

Navigating the Compliance Quagmire

According to Waaree Energies’ draft IPO documents, the company had 2,673 individual public shareholders, collectively holding a 27.68% stake. SEBI’s latest IPO processing update reveals that the regulator sought clarifications from the company’s bankers on May 21, 2024, but is still awaiting their response. Due to the non-compliance with the Companies Act, Waaree will need to resolve these issues with the Registrar of Companies (RoC) and the Ministry of Corporate Affairs (MCA). This resolution process could involve penalties and may significantly prolong the IPO timeline.

Strategic Investment Plans Post-IPO

Waaree Energies plans to utilize the Rs 3,000 crore it aims to raise through the IPO to partially fund a massive project in Odisha. The project involves establishing a 6-gigawatt manufacturing facility for ingot wafers, solar cells, and photovoltaic modules, with a total cost exceeding Rs 9,000 crore. This strategic investment is part of Waaree’s broader ambition to expand its manufacturing capabilities.

Impressive Growth Amidst Regulatory Challenges

Despite the regulatory hurdles, Waaree Energies has shown remarkable growth. As of June 30, 2023, the company boasted an installed capacity of 12 GW across four manufacturing units in Gujarat, covering a total area of 136.30 acres. For the fiscal year 2023, Waaree reported a revenue of Rs 6,750.87 crore, a substantial increase from the Rs 2,854.26 crore recorded in the previous year. Additionally, the company’s profit soared to Rs 500 crore, a significant jump from the Rs 79.6 crore profit reported in the prior fiscal year.

Conclusion: A Long Road Ahead

As Waaree Energies continues to navigate through regulatory challenges, the company’s IPO remains on hold, with no clear resolution in sight. The need to address compliance issues with the MCA and RoC indicates that the approval process may extend further, delaying the company’s ambitious expansion plans.