Transrail Lighting Limited IPO: Check IPO Date, Lot Size, Price & Details

Introduction:

Transrail Lighting is a leading Indian engineering, procurement, and construction (EPC) company specializing in the power transmission and distribution sector. The company operates integrated manufacturing facilities for lattice structures, conductors, and monopoles. With a legacy spanning four decades, Transrail has established itself as a reliable and trusted partner in delivering turnkey solutions for power transmission and distribution projects worldwide.

Since its inception, the company has successfully completed over 200 projects in this domain, showcasing its extensive expertise in project execution. Transrail’s capabilities include skilled manpower, in-house manufacturing of key materials, and access to advanced machinery, enabling seamless operations both in India and across international markets, particularly in Asia and Africa.

As of June 30, 2024, Transrail has executed EPC projects for 34,654 circuit kilometers (CKM) of transmission lines and 30,000 CKM of distribution lines globally. The company also provides EPC services for substations with capacities of up to 765 kilovolts (kV) and has an operational footprint in 58 countries. Beyond its core power transmission and distribution business, Transrail is actively involved in other verticals, including civil construction, poles and lighting, and railway infrastructure.

IPO Details:

Objectives of Issue:

• Incremental financing working capital requirements of the company
• Funding capital expenditure of the company
• General corporate purpose

Key Strengths:

• Expansion into Allied /ancillary Infrastructure Sectors- In the coming years, the company aims to maintain its focus on executing ongoing projects while exploring opportunities to diversify into related infrastructure sectors. To enhance its capabilities, it plans to acquire the BH business of Gammon Engineers and Contractors Private Limited, thereby broadening its scope to include hydroelectric power projects. Additionally, the company is looking to expand its presence in the solar EPC sector by undertaking turnkey projects for solar rooftop installations, solar streetlights, and ground-mounted solar systems.

• Strong In House Design and Engineering- The company operates its EPC business through an integrated approach, leveraging in-house capabilities to manage projects from conceptualization to completion. It has established specialized design and engineering teams for each business vertical, ensuring efficient execution and timely delivery of projects without compromising quality. This integrated model has enabled the company to capture a significant portion of the EPC value chain while consistently delivering high-quality outcomes.

Risks:

• Over Dependence on Government Orders – In the past 3 years government and government-owned entities had a major share in the revenue of company amounting to more than 80%. As on 30^th June 2024, the share of government and government-related entities in the revenue is 69.6%.Hence any change in the government's stance towards this sector or inadequate budget allocation towards the sector, could severally affect the entity's business operations.

• Excessive Dependence on Top 10 clients– The company derives a significant portion of its revenue from its top 10 clients contributing almost 80% of the revenue in the last 3 years. Moreover the contribution of the top 5 customers constitutes more than 60% of the revenue. Hence any loss of customers could significantly affect the revenue-generating capability of the company 

• Limited Negotiation Power- The company’s ability to negotiate contract terms with government authorities or entities is significantly limited, as these terms are often structured to favor the government as major of the clients are domestic or international governments. For instance, the terms laying out its obligations about delivery and completion schedules, specifications for manufacturing and testing of products, guarantees to be furnished by us for the project, right of way, foreign clearances, etc., are determined by the government entities and the company is not permitted to amend such terms

Financial Snapshot:

KPI comparison with Industry Peers

Conclusion:

A comparative analysis of the company's financial statements against its peers highlights several positive aspects, demonstrating its ability to outperform in various key performance indicators (KPIs). When comparing the Price-to-Earnings (P/E), the company appears to be relatively undervalued compared to its competitors. Its expansion plans, attractive valuations, and bright fundamentals make it a long-term compelling investment opportunity.