Can Clean Max IPO deliver long-term growth for high risk investors?

ET Intelligence Group: Clean Max Enviro Energy Solutions, India’s largest renewable energy provider to corporates, plans to raise ₹1,200 crore through a fresh issue to repay debt and ₹1,900 crore through an offer for sale. The promoter stake will fall to 49% after the IPO from 65.4%. The company is a market leader and has chalked out future capacity expansion plans. However, the company faces risks related to land acquisition, dependence on long-term corporate power purchase agreements (PPAs) and vulnerability to policy and tariff changes in the renewable energy sector. Given these factors, the IPO appears to be suitable for long-term investors with a higher risk tolerance.

Business

Clean Max Enviro Energy Solutions focusses on commercial and industrial (C and I) customers. The company builds, owns and operates solar and wind plants and supplies renewable power to its customers. It has 2.8 giga watts (GW) of operational owned-and-managed capacity and 3.2 GW of contracted capacity yet to be executed as of October 31, 2025. It has C and I client base of 555 customers and 1,198 long-term PPAs. Its business is structured into two segments. The renewable energy power sales segment, which contributed 74% to total sales in FY25. The other business vertical of renewable energy services includes turnkey engineering, procurement, and construction (EPC) and operation and maintenance (O&M) services, capex-based project development for customers, and carbon credit solutions.

Unlike utility-scale developers that compete in low-tariff auctionsClean Max signs direct contracts with corporates, enabling it to secure higher tariffs of about ₹3.8 per kilowatt hour (kWh) compared with the ₹2.5-3 per kWh range for other utility players. It has presence across 23 states and select international markets, backed by a repeat business ratio of nearly 72% and an average PPA tenure of over 22 years.

Financials
Revenue increased 27% annually to ₹1,495.7 crore in FY25 from ₹929.5 crore in FY23. Net profit rose to ₹27.8 crore in FY25 compared to a loss of ₹30.9 crore in FY24 and ₹65 crore in FY23. The operating margin before depreciation and amortisation (Ebitda margin) of the power sales segment improved to 82% in FY25 from 75% in FY23 while that of the services segment improved to 14% from 11% in the same period. The debt-to-equity ratio improved to 1.9 in FY25 from 2.2 in FY23 against a peer range of 0.9-4.7.

Valuation
Since the company has started reporting profit recently, its price-earnings multiple seems to be significantly high at around 324. Its enterprise value (EV) works out to be around 16 times annualised Ebitda for the six months to September 2025. The average EV/Ebitda for listed peers is 27.