The September 2025 quarter results paint a picture of strong volume-driven growth tempered by margin pressures and sequential profit decline. Whilst Inox Wind's topline expansion reflects robust demand in India's renewable energy sector, the company faces challenges in maintaining profitability levels achieved in previous quarters. The stock, currently trading at ₹149.00, has declined 21.48% over the past year and remains in mildly bearish technical territory, raising questions about valuation sustainability despite operational improvements.
The company's transformation from loss-making quarters in FY24 to consistent profitability in FY25 and FY26 demonstrates significant operational turnaround. However, with a P/E ratio of 50.45x and premium valuations across most metrics, investors are paying heavily for this growth story. The recent promoter stake increase to 44.18% in September 2025 from negligible levels earlier signals confidence, but institutional investors remain cautious with FII holdings declining sequentially.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | YoY Growth | Cons. PAT (₹ Cr) | QoQ Growth | Operating Margin |
|---|---|---|---|---|---|---|
| Sep'25 | 1,119.18 | +35.45% | +52.68% | 91.75 | -13.33% | 20.35% |
| Jun'25 | 826.25 | -35.19% | +29.19% | 105.86 | -43.35% | 22.23% |
| Mar'25 | 1,274.82 | +39.89% | +141.57% | 186.87 | +60.20% | 19.95% |
| Dec'24 | 911.27 | +24.32% | — | 116.65 | +354.24% | 22.38% |
| Sep'24 | 733.01 | +14.61% | — | 25.68 | +149.56% | 22.66% |
| Jun'24 | 639.57 | +21.19% | — | 10.29 | -77.89% | 21.04% |
| Mar'24 | 527.73 | — | — | 46.54 | — | 18.71% |
Financial Performance: Impressive Growth Meets Margin Challenges
Inox Wind's Q2 FY26 financial performance showcases the company's strong execution on order book conversion whilst highlighting margin pressures that warrant investor attention. Net sales of ₹1,119.18 crores marked a robust 52.68% year-on-year increase and a sequential jump of 35.45% from Q1 FY26's ₹826.25 crores. This revenue acceleration reflects the company's success in capitalising on India's renewable energy push and improving capacity utilisation across its manufacturing facilities.
However, the profitability picture reveals concerning trends. Operating profit (PBDIT excluding other income) stood at ₹227.72 crores with a margin of 20.35%, representing a contraction of 231 basis points year-on-year from 22.66% in Q2 FY24 and 188 basis points sequentially from 22.23% in Q1 FY26. This margin compression suggests rising input costs, competitive pricing pressures, or unfavourable product mix shifts that the company has struggled to offset through operational efficiencies.
The consolidated net profit of ₹91.75 crores, whilst impressive on a year-on-year basis with 257.28% growth, declined 13.33% sequentially from Q1 FY26's ₹105.86 crores. This sequential decline is particularly noteworthy given the 35.45% jump in revenues, indicating that margin pressures and higher costs outweighed volume benefits. The PAT margin of 10.78% in Q2 FY26 represents a 100 basis point sequential decline and a 74 basis point year-on-year contraction.
Interest costs surged to ₹50.81 crores in Q2 FY26, the highest quarterly level in recent periods, up from ₹33.79 crores in Q1 FY26 and ₹43.91 crores in Q2 FY24. This 50.33% sequential increase in finance costs reflects higher working capital requirements to support revenue growth and potentially increased borrowings to fund capacity expansion. Depreciation remained relatively stable at ₹50.80 crores, whilst the tax rate normalised to 28.80% from the anomalously low 8.33% in Q4 FY25.
Quality of Earnings: Strong Cash Generation Supports Growth
On an annual basis, Inox Wind generated operating cash flow of ₹137.96 crores in FY25, a remarkable turnaround from negative ₹366 crores in FY24. This positive cash generation alongside profit growth demonstrates improving working capital management and genuine earnings quality. However, the company deployed ₹406 crores in investing activities during FY25, primarily for capacity expansion, funded partially through ₹276 crores of financing inflows. The improving cash position provides financial flexibility for growth investments.
Return Ratios: Emerging from Distress but Still Below Par
Inox Wind's return on equity (ROE) and return on capital employed (ROCE) metrics reflect a company in transition from financial distress to profitability, though absolute levels remain concerning. The company's average ROE of 1.63% over recent periods is exceptionally weak, though the latest half-yearly ROCE of 11.18% shows meaningful improvement. This low average ROE indicates that the company has historically generated minimal returns on shareholder capital, a legacy of loss-making years that will take sustained profitability to overcome.
The latest ROCE of 9.49% and ROE of 8.17% represent significant improvements from negative territory in previous years, demonstrating operational turnaround momentum. However, these returns remain substantially below industry standards and fail to adequately compensate for the capital intensity and risks inherent in the wind energy equipment manufacturing business. The company's shareholder funds have grown to ₹5,046.74 crores in FY25 from ₹2,808.42 crores in FY24, driven by retained profits and equity issuance, providing a stronger capital base for future growth.
The balance sheet reveals improved financial health with long-term debt declining dramatically to just ₹1.90 crores in FY25 from ₹226.62 crores in FY24, resulting in a debt-to-equity ratio of merely 0.17 times. This deleveraging significantly reduces financial risk and interest burden, though the company still carries substantial current liabilities of ₹3,055.37 crores. Fixed assets have grown to ₹2,224.54 crores, reflecting ongoing capacity expansion to capture market opportunities in India's renewable energy sector.
⚠️ Return Ratio Reality Check: Whilst ROCE has improved to 11.18% in H1 FY26 from negative levels, this remains below the cost of capital for a capital-intensive manufacturing business. The average ROE of 1.63% is concerning, and even the latest 8.17% ROE falls short of expectations. Investors should monitor whether the company can sustain and improve these returns as it scales operations, or whether competitive pressures and margin challenges will constrain profitability.
Operational Momentum: Volume Growth Driving Revenue Surge
The operational narrative at Inox Wind centres on strong order book execution and capacity utilisation improvements that have driven impressive revenue growth. The company's net sales have grown at a five-year compound annual growth rate (CAGR) of 44.36%, reflecting both the recovery from loss-making years and the broader tailwinds in India's wind energy sector. The 103.7% revenue growth in FY25 to ₹3,557 crores from ₹1,746 crores in FY24 demonstrates the company's ability to convert its order book into revenues.
With a combined manufacturing capacity of approximately 2.5 GW across four facilities in Gujarat, Himachal Pradesh, and Madhya Pradesh, Inox Wind is positioned as a fully integrated player in the wind energy value chain. The inventory turnover ratio improved to 2.84 times in H1 FY26, the highest level in recent periods, indicating efficient working capital management and faster conversion of inventory into sales. This operational efficiency is crucial for a project-based business where execution timelines and working capital management significantly impact profitability.
Employee costs have risen proportionately with business growth, reaching ₹56.02 crores in Q2 FY26 from ₹41.13 crores in Q2 FY24, a 36.22% increase that is below the 52.68% revenue growth, suggesting improving labour productivity. The company's ability to scale revenues faster than fixed costs demonstrates operational leverage, though this advantage has been partially offset by margin pressures from raw material costs and competitive pricing.
| Metric | Q2 FY26 | Q1 FY26 | Q2 FY24 | Change (YoY) |
|---|---|---|---|---|
| Net Sales (₹ Cr) | 1,119.18 | 826.25 | 733.01 | +52.68% |
| Operating Profit (₹ Cr) | 227.72 | 183.69 | 166.09 | +37.11% |
| Operating Margin % | 20.35% | 22.23% | 22.66% | -231 bps |
| Interest (₹ Cr) | 50.81 | 33.79 | 43.91 | +15.71% |
| PAT Margin % | 10.78% | 11.78% | 11.52% | -74 bps |
Industry Context: Riding the Renewable Energy Wave
Inox Wind operates in India's wind energy equipment sector, which benefits from strong government policy support and corporate sustainability commitments driving renewable energy adoption. The company's 52.68% year-on-year revenue growth in Q2 FY26 significantly outpaces the broader heavy electrical equipment sector's 2.22% one-year return, demonstrating the specific tailwinds in wind energy. However, the sector faces challenges including intense competition, pricing pressures, and execution risks on large projects.
The renewable energy sector in India has witnessed substantial capacity additions, with wind energy forming a crucial component of the country's clean energy transition goals. Inox Wind's position as one of the leading domestic manufacturers provides advantages in terms of local content requirements and proximity to customers. However, the entry of global players and aggressive pricing by competitors has intensified margin pressures, evident in the company's declining operating margins despite strong volume growth.
The company's order book visibility and execution capabilities will be critical determinants of sustained growth. Whilst specific order book details are not disclosed in the quarterly results, the consistent revenue growth over recent quarters suggests healthy order inflows. The challenge lies in converting this topline growth into sustainable bottom-line expansion whilst managing working capital efficiently in a project-intensive business model.
Peer Comparison: Valuation Premium Despite Weaker Returns
When compared to peers in the heavy electrical equipment sector, Inox Wind presents a mixed picture. The company's P/E ratio of 50.45x is below the sector average of approximately 96x, primarily due to outliers like BHEL trading at 175.68x. However, Inox Wind's returns metrics are significantly weaker than most peers, with ROE of 1.63% substantially trailing Suzlon Energy's 14.45%, Thermax's 11.85%, and GE Vernova T&D's 16.31%.
| Company | P/E (TTM) | P/BV | ROE % | Debt/Equity | Div Yield |
|---|---|---|---|---|---|
| Inox Wind | 50.45 | 5.10 | 1.63% | 0.22 | NA |
| Suzlon Energy | 24.68 | 9.96 | 14.45% | -0.06 | NA |
| Thermax | 60.32 | 7.09 | 11.85% | -0.14 | 0.47% |
| GE Vernova T&D | 84.39 | 37.21 | 16.31% | -0.41 | 0.16% |
| Hitachi Energy | 133.40 | 20.88 | 12.00% | -1.00 | 0.03% |
| BHEL | 175.68 | 4.02 | 1.63% | 0.12 | 0.19% |
Inox Wind's price-to-book ratio of 5.10x appears reasonable relative to peers, particularly when compared to GE Vernova T&D's 37.21x or Hitachi Energy's 20.88x. However, this valuation multiple seems elevated when considered alongside the company's weak ROE performance. The market appears to be pricing in significant future improvements in return ratios, creating execution risk if the company fails to deliver sustained margin expansion and capital efficiency gains.
The company's debt-to-equity ratio of 0.22 is amongst the lowest in the peer group, providing financial stability and flexibility. However, unlike several peers that maintain negative net debt positions, Inox Wind still carries some leverage. The absence of dividend payments, common amongst most peers in this growth-focused sector, means investors are entirely dependent on capital appreciation for returns.
Valuation Analysis: Premium Pricing for Turnaround Story
Inox Wind's valuation metrics reflect a market willing to pay premium multiples for a turnaround narrative and renewable energy exposure. The P/E ratio of 50.45x, whilst below some sector peers, represents a substantial premium to the broader market and implies high expectations for sustained profit growth. The price-to-book ratio of 5.10x means investors are paying over five times the company's net asset value, justified only if the company can generate returns significantly above its cost of capital.
The EV/EBITDA multiple of 32.96x and EV/EBIT of 42.84x are elevated by any standard, reflecting the market's optimism about the company's growth trajectory in India's expanding renewable energy sector. These multiples leave little room for disappointment, with any execution missteps or margin pressures likely to result in sharp valuation corrections. The EV/Sales ratio of 7.17x indicates that the market values each rupee of Inox Wind's revenue at over seven times, a premium typically reserved for high-margin, capital-light businesses rather than manufacturing companies.
The company's valuation grade of "Very Expensive" accurately reflects these premium multiples. The PEG ratio of 0.07x appears attractive on the surface, suggesting the stock is undervalued relative to growth expectations. However, this metric can be misleading for companies transitioning from losses to profits, where growth rates are distorted by low or negative base effects. Investors should focus on absolute return metrics and sustainable margin levels rather than relying heavily on growth-adjusted valuation multiples.
With the stock trading at ₹149.00, down 30.31% from its 52-week high of ₹213.80, there has been a meaningful valuation correction. However, even at current levels, the stock remains expensive on most metrics. A fair value estimate would require the company to demonstrate sustained ROCE above 15% and operating margins consistently above 22-23% to justify current valuations. Any shortfall in these parameters would warrant further downside.
Shareholding Dynamics: Promoter Return Signals Confidence
The shareholding pattern of Inox Wind has witnessed a dramatic transformation in recent quarters, most notably the surge in promoter holding to 44.18% in September 2025 from negligible levels of 0.77% in August 2025. This substantial increase of 43.41 percentage points in a single quarter represents a significant vote of confidence from the promoter group, led by Inox Leasing and Finance Limited (27.71%), Devansh Trademart LLP (8.62%), and Aryavardhan Trading LLP (5.99%).
| Quarter | Promoter | Change | FII | Change | MF | Change | Insurance |
|---|---|---|---|---|---|---|---|
| Sep'25 | 44.18% | +43.41% | 13.37% | -0.09% | 7.93% | +0.34% | 0.11% |
| Aug'25 | 0.77% | -0.05% | 13.46% | -0.31% | 7.59% | +0.61% | 0.13% |
| Jun'25 | 0.82% | -1.09% | 13.77% | -1.90% | 6.98% | -0.17% | 0.12% |
| Mar'25 | 1.91% | +0.18% | 15.67% | +0.41% | 7.15% | -0.13% | 0.08% |
| Dec'24 | 1.73% | — | 15.26% | — | 7.28% | — | 0.29% |
Foreign institutional investors (FIIs) hold 13.37% of the company, declining marginally by 0.09 percentage points in September 2025 and showing a more pronounced reduction of 1.90 percentage points from June to August 2025. This gradual FII exit suggests some institutional investors are booking profits or reassessing valuations after the stock's strong run-up in previous years. The FII stake of 13.37% remains substantial but the declining trend warrants monitoring.
Mutual fund holdings have increased to 7.93% in September 2025 from 6.98% in June 2025, with 25 different mutual fund schemes holding positions in the company. This steady accumulation by domestic institutional investors provides some support to the stock, though the absolute holding level remains modest. Insurance company holdings are negligible at 0.11%, whilst other domestic institutional investors hold 1.83%. The total institutional holding of 23.24% is healthy but not overwhelming, leaving the stock vulnerable to retail investor sentiment swings.
The absence of promoter pledging is a significant positive, eliminating concerns about forced selling or governance issues. Non-institutional holdings comprise 32.59% of the equity, representing retail and high-net-worth investors who have been active participants in the stock's volatility. The recent promoter stake increase provides stability and alignment of interests, though investors should monitor whether this was a one-time event or part of a broader strategy to increase management control.
Stock Performance: Significant Correction from Peaks
Inox Wind's stock performance presents a tale of two timeframes: spectacular long-term gains overshadowed by recent weakness. The stock has declined 21.48% over the past year, significantly underperforming the Sensex's 9.00% gain and generating negative alpha of 30.48 percentage points. This underperformance extends to the year-to-date period, with the stock down 17.68% compared to the Sensex's 8.22% gain, resulting in negative alpha of 25.90 percentage points.
| Period | Stock Return | Sensex Return | Alpha | Outperformance |
|---|---|---|---|---|
| 1 Week | -0.40% | 1.62% | -2.02% | No |
| 1 Month | 1.19% | 3.09% | -1.90% | No |
| 3 Months | 8.76% | 4.92% | +3.84% | Yes |
| 6 Months | -14.47% | 3.97% | -18.44% | No |
| YTD | -17.68% | 8.22% | -25.90% | No |
| 1 Year | -21.48% | 9.00% | -30.48% | No |
| 2 Years | 132.68% | 30.23% | +102.45% | Yes |
| 3 Years | 376.04% | 37.22% | +338.82% | Yes |
| 5 Years | 1414.61% | 93.78% | +1320.83% | Yes |
However, zooming out reveals the stock's remarkable journey from distressed levels. Over two years, Inox Wind has delivered returns of 132.68% compared to the Sensex's 30.23%, generating positive alpha of 102.45 percentage points. The three-year return of 376.04% and five-year return of 1414.61% demonstrate the extraordinary wealth creation for long-term investors who backed the company during its turnaround phase. These returns reflect the stock's recovery from single-digit levels to current prices above ₹140.
The stock's beta of 1.35 classifies it as a high-beta security, meaning it tends to move more dramatically than the broader market in both directions. This high volatility is evident in the stock's 45.88% annualised volatility over the past year, more than three times the Sensex's 12.26% volatility. The negative Sharpe ratio indicates that the stock has delivered negative risk-adjusted returns over the one-year period, falling into the "high risk, low return" category.
From a technical perspective, the stock is in a "mildly bearish" trend since November 3, 2025, trading below all major moving averages including the 5-day (₹150.34), 20-day (₹151.52), 50-day (₹148.19), 100-day (₹153.31), and 200-day (₹160.95) moving averages. The stock trades 30.31% below its 52-week high of ₹213.80 but remains 14.44% above its 52-week low of ₹130.20. Technical indicators present mixed signals, with MACD showing mildly bullish on weekly charts but mildly bearish on monthly charts, whilst Bollinger Bands indicate bearish sentiment across both timeframes.
"Inox Wind's transformation from loss-making quarters to consistent profitability is commendable, but the company must now demonstrate that it can convert topline growth into sustainable margin expansion and superior returns on capital to justify its premium valuation."
Investment Thesis: Growth Potential Versus Valuation Risk
The investment case for Inox Wind rests on several pillars: the company's position in India's growing renewable energy sector, its operational turnaround from losses to profitability, improved balance sheet strength with minimal debt, and strong promoter commitment evidenced by the recent stake increase. The company's five-year sales CAGR of 44.36% and improving return ratios demonstrate genuine business momentum rather than merely financial engineering.
The company's quality grade of "Average" reflects its improving but still suboptimal financial performance metrics. Whilst the transformation from negative ROCE to 11.18% in H1 FY26 is impressive, these returns remain below industry standards and the company's cost of capital. The financial trend is classified as "Positive" based on strong quarterly results and improving operational cash flows, providing some support to the investment narrative.
However, the investment case is significantly challenged by valuation concerns. The "Very Expensive" valuation grade, elevated P/E of 50.45x, and premium EV/EBITDA of 32.96x leave minimal margin of safety. The stock's 21.48% decline over the past year and mildly bearish technical trend suggest the market is reassessing these valuations in light of margin pressures and execution challenges. The proprietary Mojo Score of 47/100, placing the stock in "SELL" territory, reflects these concerns about risk-reward balance.
Key Strengths & Risk Factors
✓ KEY STRENGTHS
- Strong Revenue Growth: 52.68% YoY topline expansion in Q2 FY26 demonstrates robust demand and order book execution
- Operational Turnaround: Transformation from loss-making quarters to consistent profitability with improving cash generation
- Minimal Debt: Debt-to-equity ratio of 0.17 provides financial stability and flexibility for growth investments
- Promoter Confidence: Dramatic increase in promoter holding to 44.18% signals strong management commitment
- Sector Tailwinds: Positioned to benefit from India's renewable energy push and government policy support
- Integrated Operations: 2.5 GW manufacturing capacity across four facilities provides competitive advantages
- No Pledging: Zero promoter pledging eliminates governance concerns and forced selling risks
⚠ KEY CONCERNS
- Margin Compression: Operating margins declined 231 bps YoY to 20.35% despite strong volume growth
- Weak Return Ratios: Average ROE of 1.63% and latest ROE of 8.17% remain substantially below industry standards
- Expensive Valuation: P/E of 50.45x and EV/EBITDA of 32.96x leave minimal margin of safety
- Rising Interest Costs: Interest expense surged 50.33% QoQ to ₹50.81 crores, highest in recent quarters
- Stock Underperformance: Down 21.48% over one year with negative alpha of 30.48 percentage points
- High Volatility: Beta of 1.35 and 45.88% volatility make stock suitable only for high-risk investors
- FII Exit: Declining foreign institutional holdings suggest valuation concerns amongst sophisticated investors
Outlook: What Lies Ahead
POSITIVE CATALYSTS
- Order Book Conversion: Sustained revenue growth if company maintains execution momentum
- Margin Recovery: Potential for operating margin improvement if raw material costs stabilise
- Market Share Gains: Opportunities to capture larger share of India's wind energy capacity additions
- Return Improvement: Further ROCE and ROE expansion as business scales and profitability stabilises
- Technical Reversal: Stock bouncing from support levels near ₹130 could trigger momentum buying
RED FLAGS TO MONITOR
- Further Margin Decline: Operating margins falling below 20% would signal intensifying competitive pressures
- Working Capital Stress: Rising receivables or inventory levels indicating execution challenges
- Order Book Slowdown: Deceleration in order inflows impacting revenue visibility
- Interest Cost Escalation: Continued rise in finance charges eroding profitability
- Technical Breakdown: Stock breaking below ₹130 support could trigger further selling pressure
The outlook for Inox Wind hinges on the company's ability to maintain topline momentum whilst addressing margin pressures and improving capital efficiency. The renewable energy sector tailwinds remain intact, providing a favourable operating environment. However, the company must demonstrate that recent margin compression is temporary rather than structural, and that return ratios can improve to levels that justify premium valuations.
Investors should closely monitor quarterly margin trends, order book announcements, and working capital metrics. Any sustained improvement in operating margins above 22% coupled with ROCE consistently above 15% would strengthen the investment case. Conversely, continued margin pressure or deterioration in cash generation would validate current valuation concerns and suggest further downside risk.
The Verdict: Promising Business, Challenging Valuations
Score: 47/100
For Fresh Investors: Avoid initiating positions at current levels. The stock trades at expensive valuations with P/E of 50.45x and EV/EBITDA of 32.96x, offering minimal margin of safety. Whilst the company's operational turnaround is genuine, margin pressures and weak return ratios (ROE of 8.17%) fail to justify premium multiples. Consider the stock only on significant corrections below ₹120, which would provide better risk-reward balance.
For Existing Holders: Book profits on rallies towards ₹160-165 levels. The stock has declined 21.48% over the past year and remains in mildly bearish technical trend. Whilst long-term fundamentals around India's renewable energy growth remain intact, near-term headwinds from margin compression and expensive valuations warrant profit booking. Investors with high-risk appetite may hold smaller positions with strict downside protection below ₹130.
Fair Value Estimate: ₹110-120 (26-19% downside from current levels). This valuation assumes the company maintains current profit levels with gradual margin improvement, implying a more reasonable P/E of 35-40x on sustainable earnings. Any meaningful margin expansion or ROCE improvement above 15% could support higher valuations of ₹140-150.
Rationale: Inox Wind's transformation from losses to profitability deserves recognition, and the company is well-positioned in India's growing renewable energy sector. However, current valuations discount significant future improvements that are far from certain. The combination of margin pressures (operating margins down 231 bps YoY), weak return ratios (ROE of 8.17%), expensive multiples (P/E 50.45x), and bearish technical trends creates an unfavourable risk-reward profile. The stock's high volatility (45.88%) and negative one-year returns (-21.48%) underscore execution and valuation risks. Investors are better served waiting for more attractive entry points or focusing on sector peers offering superior return profiles at reasonable valuations.
Note: ROCE = (EBIT - Other Income) / (Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results, and all investments carry risk of loss.
