Inox Wind’s 800% rally, a brutal crash and a rebound—what’s next?

Inox Wind and Suzlon Energy have seen unparallelled capacity expansion and wind power production, especially since 2022. (Image: Pixabay)
Inox Wind and Suzlon Energy have seen unparallelled capacity expansion and wind power production, especially since 2022. (Image: Pixabay)

Summary

  • While government initiatives have propelled Inox Wind's stock to unprecedented heights, recent global economic shifts have raised concerns. Here is how Inox is positioning itself in the booming renewable energy market and what lies ahead for investors.

Inox Wind has been making headlines lately due to the steep fluctuations in its stock price. As one of the key players in India’s race towards renewable energy, its stock appreciated by more than 800% from about 27 apiece in 2023 to reach a peak of 254 per share in September 2024. However, this surge was followed by a sharp decline, wiping out nearly 50% of investor wealth in the subsequent months. In the past week, the stock has managed to recover about 25%.

Let us delve into what has driven this volatility, and try to assess whether the recent recovery is likely to sustain.

Government incentives drive rally to lifetime highs

As the world moves towards renewable energy, India is no different. While thermal coal accounts for more than half of India’s installed power generation capacity, the country has set ambitious targets for itself - 500 GW of non-fossil fuel capacity by 2030, and net zero carbon emissions by 2070. This has been backed up by increasing government spending. The FY21 budget for renewable energy had stood at only about 2,600 crore, which increased six-fold in FY24, and rose further by 54% in the latest budget to 26,550 crore.

Also Read: India’s green energy transition: A vision for a sustainable future

Specifically, when it comes to wind energy, India stands fourth in the world in terms of wind power generation capacity. Wind power currently constitutes only about 10% of India’s installed capacity, and holds tremendous potential for growth. The government has been supporting both installation and power generation via wind projects.

To spur power generation, the government has allowed accelerated recognition of depreciation, and is also running a generation-based incentive scheme, available exclusively for grid-interactive wind power projects established before 2017. 

To encourage installation of wind power capacity, the government sprung into action in 2022. It initiated renewable purchase obligations (RPOs) in 2022, which mandated a minimum percentage of an area’s electricity consumption to come from wind power projects commissioned after 31 March 2022. These RPOs would increase from 0.81% in 2022 to 6.94% in 2030. Energy storage obligations were also introduced for wind and solar energy. It also exempted duties on certain components of wind energy generators, waived off inter-state transmission charges for wind power projects commissioned by June 2025, and has been working towards identifying new potential sites for wind power production. 

This explains why the two major listed players focused on wind energy—Inox Wind and Suzlon Energy—have seen unparallelled capacity expansion and wind power production, especially since 2022. Promptly, their stocks rallied by 700-800% from 2023 to reach all-time highs in September 2024.

What led to a correction

Starting September 2024, global macroeconomic factors knocked the wind out of Indian stock markets. While rising yields in the US reduced the appeal of risky emerging market equities, China’s stimulus measures drew foreign investors away from frothy Indian equities.

The brunt of this was borne by sectors and segments which had appreciated the most in the rally until then. The faster they had risen, the harder they started to fall. During this market-wide negative sentiment, renewable energy was particularly hit, in anticipation of anti-climate-change policies under the new US president. Inox Wind, which had rallied by 800% until then, eroded almost 50% of investor wealth over the course of four months.

But things have changed in the last one week.

Inox’s turnaround and its recent recovery

In anticipation of government support for renewable energy in the budget, stocks of both, Inox and Suzlon, started recovering towards the end of last month. Adding fuel to this rediscovered fire in the stock, Inox released its Q3 earnings right before the budget. Inox’s numbers indicate a promising turnaround in its business – it turned profitable, and how!

Inox Wind is an end-to-end player in wind power. It has wind power generation capacity of 2.5 GW across four facilities in the country, with more than a decade of operational track record. It is fully integrated through its subsidiaries. Inox Green has wind operations and maintenance capacity of 3.5 GW, and Inox Renewable Solutions provides EPC (engineering, procurement, and construction) services from resource assessment, site acquisition, and infrastructure development to erection and commissioning of wind turbine generators (WTGs).

Notwithstanding these inherent strengths, the subpar scale of execution at Inox Wind resulted in low revenues, which could not justify the costs. Consequently, it had been delivering year after year of losses. 

But the tide seems to have turned. The latest quarter saw Inox Wind reporting its best-ever Q3 performance. Backed by 82% year-on-year improvement in execution to 189 MW, it reported a 100% increase in revenues to 994 crore, and a whopping 50-fold increase in profits to 112 crore. Supported by higher operating leverage from improved execution and higher contribution from WTGs, margins surpassed management’s guidance, and profits beat analysts’ expectations. Moreover, FY25 is expected to be a milestone year for the company, with the highest profits booked in its entire history. 

In response, its stock rallied by a whopping 25% in only a week, significantly outperforming its peer Suzlon, which appreciated by a relatively mellow 13% during the period.

Is the recovery here to stay?

Inox Wind has big plans for its future. Under the National Electricity Plan, India is slated to add approximately 80 GW wind power capacity over the next eight years. This provides visibility of more than 6 trillion revenues for wind OEMs, and Inox is working towards capturing a large slice of this fast-growing pie. Its capex plans include doubling Inox Green’s portfolio to 6 GW by FY26 and to 10 GW in the next two to three years while backward integrating through the purchase of cranes and transformer manufacturing to support margins. It also has plans to venture into solar power, which is expected to open up new opportunities in the higher-IRR hybrid projects.

Inox’s order book has swelled to 3.286 GW from 2.575 GW during the year-ago period. Order inflows for FY25 are expected at around 1.4 GW. While this robust order book provides enhanced revenue visibility, execution will be key. With the new Ahmedabad plant commencing operations in Q4, FY25 execution is expected at 800 MW. That is more than double the execution of last year, while FY26 is expected to see 50% higher execution at 1200 MW, and the plan is to touch 2 GW by FY27.

Assuming Inox Wind sustains the recent execution momentum, its valuation of 8.6x its book value appears markedly undervalued compared to its peer Suzlon’s 18.3x. This leaves enough room for further appreciation.

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From a technical angle, Inox had been in a downtrend, forming lower highs and lower lows since September 2024. The recent recovery has led it to break out above the support level of 150 per share. The fact that the latest move has come following an improvement in fundamentals and has been supported by high volumes instils confidence in its sustainability. At the time of publishing this article, the stock is trading around 170. If it sustains above this level, it would mark an end to the downtrend and make room for the next leg of the rally.

For more such analyses head to Profit Pulse.

Ananya Roy is the founder of Credibull Capital, a SEBI-registered investment adviser. X: @ananyaroycfa

Views are personal and do not represent the stand of this publication.

Also Read | Real costs: Why solar and wind energy are not market winners yet

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