Transrail Lighting Filed DRHP With SEBI to Raise 450 Cr via IPO

Transrail Lighting Ltd, a leading engineering, procurement and construction (EPC) company, has filed Draft Red Herring Prospectus (DRHP) with the financial markets regulator Securities and Exchange Board of India (SEBI). As per DRHP, the company is seeking to raise ~₹450 crore via an initial public offering (IPO) from the fresh issue component of the IPO, while the offer for sale component comprises sales of 1,01,60,000 shares by the promoter Ajanma Holdings Private Limited.

The company intends to raise funds by offering equity shares of face value ₹2 each through the issue. Inga Ventures Private Limited, Axis Capital, HDFC Bank, and IDBI Capital Markets & Securities are the book-running lead managers that will advise the company on the issue.

Use of IPO Proceeds

A total of ₹250 crore from the new issue’s proceeds will be allocated to supporting increased working capital requirements, ₹90.90 crore to capital expenditure, and the remaining amount to general corporate purposes.

About Transrail Lighting Ltd

Transrail Lighting Ltd is one of the leading engineering, procurement and construction (EPC) companies in India. The company is primarily focused on the power transmission and distribution business and integrated manufacturing facilities for lattice structures, conductors, and monopoles. Transrail Lighting has a proven track record of four decades in providing comprehensive solutions on a turnkey basis globally. It has been a trusted and longstanding partner in the power transmission and distribution sector.

The company has a rich position in the power transmission and distribution sector on the back of its rich presence in 58 countries like Bangladesh, Kenya, Tanzania, Niger, Nigeria, Mali, Cameroon, Finland, Poland, Nicaragua etc., including turnkey EPCs or supply projects. As of September 30, 2023, the company has undertaken an EPC of 33,500 circuit kilometres (CKM) transmission lines and 30,000 CKM distribution lines, domestically and internationally.

For the period ended September 30, 2023, the company reported revenue from operations amounting to ₹18,467.91 million, and net profit after tax for the period stood at ₹848.88 million.

During FY 2021-2023, the company’s revenue grew at a CAGR of 20%, while its net profit for the period increased at a CAGR of 5%.

Market Overview

The power transmission and distribution system across India has expanded extensively. From FY 2019 to FY 2023, the total length of domestic transmission lines rose from 4,13,407 CKM to 4,71,341 CKM, and domestic distribution lines rose from 5,82,100 CKM to 9,71,500 CKM during the same period. The distribution industry is expected to receive a cumulative investment of around ₹3.00-3.50 trillion over the next 5 years, mostly from spending under a redesigned distribution sector scheme supported by smart metering initiatives.

SWOT Analysis

Strengths

• The company has finished over 200 projects in the power transmission and distribution vertical, showcasing the extensive project execution capabilities of the business.
• Growing order book of ₹96,204.48 million as of September 30, 2023, supported by international and domestic clients.

Weaknesses

• Higher operating expenses in FY 2023 against FY 2022.
• Rising debt to equity in FY2023 to 0.78x versus 0.71x in FY 2022.

Opportunity

• Rising demand for power from the household sector to derive a rich business for the company.
• The estimated investment in the transmission sector is likely to reach ~₹2.30 trillion during FY 2024-2028.

Threats

• The company is highly dependent on tenders being floated by government authorities, public sector undertakings and utilities. Any failure to receive tenders may impact business growth.
• Any disruption, breakdown, or shutdown of its manufacturing facilities could have an adverse material effect on its business, financial condition, results of operations, and cash flows.

Conclusion

As a prominent player in the engineering, procurement, and construction (EPC) sector, the company’s move to raise approximately ₹450 crore through an initial public offering (IPO) reflects its confidence in its capabilities and future prospects. With a strong track record spanning four decades, Transrail Lighting has established itself as a trusted partner in the power transmission and distribution industry, both domestically and internationally.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.