📌 Why Tap the Markets Now?
The company believes the timing is appropriate given its robust ₹1,700 crore order book and strong customer retention, with nearly 90% repeat business. Over the past few years, it has onboarded more than 100 new clients. The IPO proceeds will primarily fund two upcoming manufacturing facilities and investment in advanced machinery to enhance production capabilities
📊 On Valuation Positioning
Management indicated that pricing decisions were taken after consultations with anchor investors. Compared to listed peers in the engineering segment, the company believes its valuation remains competitive, especially considering its infrastructure strength and technical capabilities
⚙️ Changing Revenue Mix
While the energy segment now contributes nearly half of H1 revenues, management clarified that other verticals such as motion control and industrial equipment continue to grow in absolute terms. The shift in mix is largely due to faster growth in the energy vertical rather than weakness elsewhere.
🏭 Capacity Expansion Despite Current Utilisation
Although current utilisation levels are between 63–70%, the company highlighted that setting up high-precision engineering facilities takes 9–15 months. Based on projected demand, existing plants are expected to reach full utilisation by FY27. The new capacity, funded via IPO proceeds, is expected to become operational by Q1 FY28.
📉 Addressing Client Concentration
The top client accounts for roughly 30% of H1 revenue, while the top 10 customers together contribute around 56%. However, revenues are diversified across product categories and business segments. The overall revenue split of approximately 40-30-30 across segments helps maintain a balanced risk profile.
🌎 Exposure to US Market and Tariff Concerns
Around 60% of revenue comes from the US market. The company follows an ex-works pricing structure, meaning tariffs do not directly impact its cost structure. Additionally, customers operate with long-term supply chain strategies and typically avoid short-term supplier changes due to temporary trade measures.
🚀 Expansion into New High-Growth Areas
The company plans to expand into defense, semiconductor, aerospace, and railway segments. Management noted that similar diversification in the past — such as entry into energy in 2016 — has yielded strong results. Initial approvals and orders from defense clients have already been secured.
💰 Working Capital and Cash Flow Trends
Working capital days increased significantly following commissioning of a new plant in FY24, which drove revenue growth from ₹178 crore to ₹343 crore. Higher raw material procurement due to minimum order requirements temporarily stretched inventory levels.
Management expects working capital to gradually normalize toward historical levels of 180–200 days. After turning negative in FY25 due to expansion-related ramp-up, operating cash flows are projected to improve in FY26.
Disclosure:
This article is based on management interactions and publicly available information. The views expressed by company representatives are their own. IPORupee.com has not independently verified all statements and does not guarantee their accuracy or completeness. Investors are advised to conduct their own due diligence and consult financial advisors before making investment decisions. Investment in securities is subject to market risks.
