Transrail Lighting IPO: Strong Growth, Healthy Order Book, and International Expansion Plans

Transrail Lighting is one of the major pure Engineering, Procurement, and Construction (EPC) players in the power transmission and distribution (T&D) market. The company has been making waves in the market with this IPO of Rs 840 crores. The company had a full subscription to the IPO within a few hours despite the challenges posed by the secondary market. The IPO price ranges between Rs 410-432 per share and reflects a belief in the company’s robust growth trajectory and promising market outlook.

The Strong Business Model and Revenue Mix

The business model of Transrail Lighting mainly focuses power transmission and distribution (T&D), accounting for 83 to 84 percent of sales. Following this, the specified revenues will be derived from civil construction (about 10% of total income), railways (2-3%), and remaining income from poles & lighting.

The company generates 60 % of revenue from aboard market covering up to 22 countries in Africa, Bangladesh, and Nigeria. Transrail Lighting’s major strength is global footprint i.e. expanding emerging markets while minimizing risk by partnerships with multilateral funding agencies like the World Bank, and African and Asian Development Banks.

Healthy Order Book and Cash Flow

Transrail Lighting has an incredibly strong order book at Rs. 10000 crores whereas the company’s L1 orders stand at Rs. 3200 crores, making it perfectly feasible for continued growth in the future. Currently, the positive cash flow and potential generation of free cash flows in the future indicate a strong financial position. It is quite impressive as the performance of Transrail Lighting has been over the past years 30 percent of revenue grow annually from FY22 to FY24 and increased profitability by 90% during that period.

CEO Randeep Narang said, “We have a solid plan to maintain double-digit profit margins, where already Q1 FY25 saw margin growth of 13%.” The growth is supported mainly by backward integration of the company for conductor and tower manufacturing wherein the company has gained its competitive edge for both domestic and global markets.

Invest for Strategic Growth and Expansion

In fact, out of the entire IPO proceeds of about Rs 400 crore, the company would utilize a sizeable portion of it as working capital to be able to manage growing operations. To further develop capacity for manufacturing towers and conductors, particularly in high-tension low-sag (HTLS) conductors, a further Rs 90 crore will be invested. Hence, both the company’s EPC and product businesses will be addressed.

Transrail Lighting is going to penetrate into newer territories, after maximizing its presence in existing international markets. They are also intending to enter Australia and the US. According to the company, its strategy of investing heavily in international markets during the past couple of years has been successful and thus continue to hold the best promise for grow.

Conclusion: A Bright Future Ahead

Transrail Lighting’s IPO presents a promising investment opportunity for those looking to tap into the growing power transmission and distribution sector. With a healthy order book, strong cash flow, and a clear strategy for international expansion, Transrail Lighting is set for continued growth and value creation for its shareholders. As the company continues to scale new heights, it remains well-positioned to leverage its strengths and offer consistent returns.

> Income Tax on Minor’s Earnings: What Parents Need to Know About Tax Rules