CLN Energy Limited IPO

CLN Energy's manufacturing facilities for two-wheeler batteries have an installed cell grading capacity of 168 MWH per annum, cell sorting capacity of 358 MWH per annum, manufacturing capacity of 130 MWH per annum, and battery testing capacity of 72 MWH per annum across its Noida and Pune locations.

For batteries used in applications other than two-wheelers, the facilities have a cell grading capacity of 41 MWH per annum, cell sorting capacity of 110 MWH per annum, manufacturing capacity of 115 MWH per annum, and battery testing capacity of 41 MWH per annum, along with a motor manufacturing capacity of 60,000 units per annum at the Noida facility.

The company claims to possess in-house research and development (R&D) capabilities to design and integrate powertrain and power systems. The company states that this enables them to provide complete solutions for mobility and energy storage applications such as UPS and telecommunications.

CLN Energy's manufacturing facilities are ISO 9001:2015 certified for quality management systems, ISO 14001:2015 certified for environmental management systems, and ISO 45001:2018 certified for occupational health and safety systems.

The facilities are certified as per AIS037 (Automotive Industry Standards) by the International Centre for Automotive Technology (ICAT) and the Automotive Research Association of India (ARAI), meeting the mandatory requirements for automobile component manufacturing.

The company's products are certified for performance and safety standards, including AIS048 and AIS156 for two-wheelers (L2), e-rickshaws (L3), and three-wheelers (L5); IEC62133 (international standard for the safety of rechargeable lithium ion batteries), IEC62619 (international standard for the safety of rechargeable lithium ion batteries), and QM333 (environmental testing standard) for energy storage applications; IS16047 (Indian standards) for solar lighting applications; AIS041 for electric motors; and QF103 certification from the Technical Specification Evaluation Centre (TSEC), Department of Telecom, Government of India, for telecom lithium-ion batteries.

CLN Energy claims to have developed end-to-end capabilities in battery pack design and development, including optimising BMS algorithms to ensure high cycle life and optimal performance. The company's development process includes setting design goals, defining detailed specifications, conducting design reviews, developing processes, implementing control plans, performing detailed validation, conducting DFMEA and PFMEA, and incorporating customer feedback at various stages.

The company has seen a consistent increase in revenue from operations. Revenue from operations increased from Rs 121.69 crore in FY22 to Rs 128.82 crore in FY23 to Rs 132.71 crore in FY24.

The company, its directors and promoters are currently involved in certain ongoing legal proceedings. Any adverse judgments in any of these cases could be detrimental to the company’s business prospects.

A major portion of the company's revenue is derived from the sale of batteries, cells, motors, and controllers, with batteries being the largest contributor. Batteries accounted for Rs 49.58 crore (82.34%) of revenue for the period ended September 30, 2024, and Rs 98.87 crore (90.15%), Rs 53.98 crore (48.41%), and Rs 27.52 crore (22.69%) of revenue from operations in FY24, FY23, and FY22, respectively. The numbers for the full financial years indicate that over the years, this dependency on batteries has increased, which is a concentration risk. A decline in demand or production of these products could negatively impact the company's business operations and finances.

On June 1, 2022, the company experienced a big fire at its manufacturing facility and registered office, which caused major losses. There is no guarantee that similar incidents will not occur in the future, which could adversely affect the business.

The company relies heavily on a limited number of customers for its revenue. The top 10 customers contributed Rs 53.34 crore (71.45%) for the period ended September 30, 2024, and Rs 97.38 crore (73.56%), Rs 67.86 crore (52.78%), and Rs 53.37 crore (43.91%) to the revenue from operations in FY24, FY23, and FY22, respectively. The numbers for the full financial years indicate that over the years, this dependency on batteries has increased, which is a concentration risk. Any loss of any of these customers or a decline in business from them could adversely affect the company’s operations and finances.

A majority of the company's revenue is generated from Delhi, Maharashtra, Uttar Pradesh, and Haryana. These states contributed Rs 40.91 crore (79.57%) for the period ended September 30, 2024, and Rs 84.98 crore (77.49%), Rs 84.39 crore (75.69%), and Rs 96.93 crore (79.93%) to the revenue from operations in FY24, FY23, and FY22, respectively. Any adverse developments in the business environment of these regions could negatively impact the company's operations and revenue generation capabilities.

As of September 30, 2024, the company has outstanding debt amounting to Rs 6.78 crore. Any inability to repay or service these loans could adversely affect the company’s financial position.