The initial public offering (IPO) of Quality Power Electrical Equipments kicks-off for bidding today, that is on Friday, February 14. The company is selling its shares in the range of Rs 401-425 apiece and investors can apply for a minimum of 26 equity shares and its multiples thereafter. The issue shall close for bidding on Tuesday, February 18.
Incorporated in 2001, Sangli-based Quality Power Electrical Equipments is engaged in the business of energy transition equipment and power technologies. It provides high-voltage electrical equipment and solutions for grid connectivity and energy transition, specializing in power products across generation, transmission, distribution, and automation sectors.
The Rs 858.70 crore IPO of Quality Power Electrical Equipments includes a fresh share sale of Rs 225 crore and an-offer-for-sale (OFS) of up to 1,49,10,500 shares worth Rs 633.70 crore. The net proceeds from the issue shall be utilized towards acquisition of Mehru Electrical and Mechanical Engineers, funding capex needs, funding inorganic growth and general corporate purposes.
Quality Power manufactures critical high-voltage equipment for high voltage direct current (HVDC) and flexible AC transmission systems (FACTS) networks, enabling energy transition from renewable sources to power grids. It offers reactors, transformers, converters, and grid interconnection solutions globally with over 20 years of experience.
Quality Power Electrical Equipments reported a net profit of Rs 50.08 crore with a revenue of Rs 182.72 crore for the six months ended on September 30, 2024. The company clocked a bottomline of Rs 55.47 crore with a revenue of Rs 331.4 crore for the financial year 2023-24. Quality Power commands a market capitalization of Rs 3,291.38 crore.
Quality Power has reserved 75 per cent of the net issue for the qualified institutional bidders (QIBs), while non-institutional investors (NIIs) shall be offered 15 per cent of the allocation. Remaining 10 per cent of the shares shall be allocated towards the retail investors of the issue.
Pantomath Capital Advisors is the book-running lead manager of the Quality Power IPO, while Link Intime India is the registrar for the issue. Shares of the company shall be listed at the bourses on both BSE and NSE with February 21, Friday as the tentative date of listing. Here's what brokerage firms said about the IPO of Quality Power Electrical Equipments:
Elara Capital Rating: Subscribe for long-term The thrust toward renewable energy and the resulting surge in HVDC demand has led to a capacity crunch globally, leading to India’s companies catering to demand. Quality Power has grown its business through acquisitions. Quality Power has a sizable presence in reactors & transformers, and new capacity underway would drive major growth once operational, said Elara Capital.
"The proposed Mehru acquisition has the potential for value unlocking via selling Mehru’s products abroad by utilizing Quality Power’s brand and distribution channel, as most Mehru’s sales are domestic. Post issue, it would be at 47 times Proforma FY24 P/E at a sizable discount to peers. We recommend Subscribe for the long term," it said.
Reliance Securities Rating: Subscribe Quality Power is strategically positioned as an Indian producer of high-voltage power products and power quality systems with a diversified global customer base of 210+ global clients including Fortune 500 companies fostering long term relationships focusing on technology, scale of operations, reliability and quality in energy projects, said Reliance Securities.
"It has a seasoned team which brings extensive industry experience and skilled workforce, enabling it to capitalize on growth opportunities, acquire companies at strategic pricing driving growth, market expansion and effective project execution to scale stronger growth through its product offerings, unlocks geographical expansion and solidifying leadership in the energy transmission sector in the coming years," it added with a 'subscribe' rating.
SBI Securities Rating: Subscribe for long-term Quality Power is valued at FY24 P/E and EV/Ebitda multiple of 59.3 times and 80.8 times, respectively but the issue looks expensive. The proforma FY24 P/E and EV/Ebitda multiples are 50.1 times and 59 times, respectively which appears to be expensive looking at the relatively smaller scale of business, said SBI Securities.
"Although the company is doing well on financial metrics and generates healthy return ratios in the range of 34-36 per cent, we believe the listing gains can be muted due to relatively stretched valuations. Hence, we recommend investors only with a long term investment horizon to subscribe to the issue at the cut-off price," he said.
Choice Broking Rating: Subscribe Quality Power is a technology-driven company specializing in power products and solutions across the power generation, transmission, distribution, and automation sectors. When comparing the company's margins on a restated and proforma basis for FY24 and for H1FY25, there is a noticeable decline in both proforma’s EBITDA and PAT margins, said Choice Broking.
"Considering its over two decades of experience in the energy transition sector and wide range of products & solutions, we believe the company is well positioned to benefit from the rising demand of energy transition equipments, which would assist in generating a profitable business growth. Thus, we assign a 'subscribe' rating for the issue," Choice Broking added.
Mehta Equities Rating: Subscribe for long-term Quality Power reported a net profit growth of 39.1 per cent in FY 2024, rebounding from a 5.5 per cent decline in FY23. Based on annualized FY25 earnings and fully diluted post –IPO paid up capital, the company is asking for a P/E of 30.76 times, which appears reasonable when compared to its listed industry peers, said Mehta Equities.
"Given its recent strategic growth initiatives acquisitions, it would allow the company to expand its product range especially in 500kV transformers which could strengthens its position in high voltage equipment market, so we believe Quality Power is well-positioned to capitalize on India's evolving energy landscape," it added with a 'subscribe for long-term' rating for the issue.
StoxBox Rating: Subscribe for long-term The company is valued at a PE ratio of 81.9 times on the upper price band based on FY24 earnings, which is lower than its peers, said StoxBox. Given its strong financial growth, diverse product portfolio and global customer base, the company is well-positioned to achieve sustained growth within the sector, it added with a 'subscribe for long-term' rating.
Canara Bank Securities Rating: Subscribe for long-term Quality Power excels in high-voltage power transmission, specializing in HVDC and FACTS technologies. With seven operational facilities and two more under construction, QPEEL addresses the growing demand for energy transition solutions. Their backward integration into polymer compounding, copper processing, and EMS enhances cost efficiency, said Canara Bank Securities.
"Strategic expansion, including a recent acquisition in Turkey, strengthens their market position, especially in the oil and gas sector. With over 80 per cent of revenue from global markets, Quality Power avoids tender-based businesses, ensuring stability. Despite valuation concerns, given its market position and focus on technological advancements, a subscribe for long-term gains is recommended," it said.