Broker’s call: Acme Solar Holdings (Buy)

Acme Solar Holdings is pivoting from a standard solar IPP, currently generating 3GW of power, to a more complex renewable energy developer with approximately 95 percent of its 5.4GW pipeline. The company also aims to be a prominent player in battery energy storage systems (BESS), with an estimated capacity of 17GWh. Acme intends to start commissioning its first complex project by December 2026, with the full portfolio expected to be operational by the end of fiscal year 30 (delayed by one year due to transmission constraints).

This shift in strategy is projected to result in an EBITDA run-rate of ₹8,900 crore, with a compound annual growth rate of 38 percent from fiscal years 26 to 31. The company's capital expenditure is expected to total around ₹52,000 crore, funded entirely through internal accruals, existing cash reserves, and proceeds from a qualified institutional placement (QIP).

By fiscal year 30, net debt to EBITDA is anticipated to improve to 5.9 times (from 7.2 times in fiscal years 26), while operating cash flow, after interest, is expected to be ₹3,000 crore. Utilizing a comparative analysis framework, the analyst values Acme Solar at 11 times the forecasted EBITDA for fiscal year 30 and discounts this to the closing price on September 27, 2027, which is ₹550 per share.

The recommendation is to initiate a buy position. However, several risks and concerns are identified, including potential transmission connectivity delays, increased curtailment, higher funding costs, escalating competitive intensity, reduced tariffs in bidding processes, inflationary pressures driving up capex per MW, and the potential risk to internal rate of return (IRR) due to the rising costs of BESS.