Oswal Pumps IPO: GMP nearly doubles in 3 days; here's what analysts say on issue

The initial public offering (IPO) of Oswal Pumps is set to open for bidding on Friday, June 13, and will close on Tuesday, June 17. The company will offer shares in the price range of Rs 584 to Rs 614 per share. Investors can apply for a minimum of 24 equity shares and in multiples thereafter. The IPO aims to raise a total of Rs 1,387.34 crore, including a fresh issue of Rs 890 crore and an offer-for-sale (OFS) of up to 81,00,000 equity shares amounting to Rs 497.34 crore.

Oswal Pumps, incorporated in 2003, is a Karnal-based manufacturer and distributor of a diverse range of pumps, which cater to domestic, agricultural, and industrial needs. The company has also been involved in executing orders for 26,270 turnkey solar pumping systems under the PM-KUSUM Scheme across several states. Its manufacturing facility in Karnal covers 41,076 square meters.

Oswal Pumps is amongst the largest suppliers of solar pumps under PM Kusum Scheme for FY23 & FY24 and is one of the few companies with vertically integrated turnkey solar pumping system capabilities in India. It has delivered robust revenue, Ebitda and PAT CAGR of 45.1 per cent, 97.4 per cent and 140.2 per cent between FY22-FY24 respectively, said SBI Securities.

The IPO is valued at 9MFY25 annualized P/E and EV/Ebitda multiple of 24.2 times and 15.1 times, respectively. It has an order book of Rs 1,100 crore with an additional bid pipeline of Rs 3,200 crore indicating decent growth visibility. However, an overhang for the business would be its dependence on government projects and delay in cash flow," it said with a 'subscribe for long term' rating.

The objectives of the IPO include funding certain capital expenditures, pre-payment or re-payment of some outstanding borrowings, and investing in its wholly-owned subsidiary, Oswal Solar, to set up a new manufacturing unit. The funds will also be allocated for general corporate purposes.

Oswal Pumps reported a net profit of Rs 216.71 crore with revenue of Rs 1,067.34 crore for the nine months ending December 31, 2024. For the financial year 2023-24, the company recorded a net profit of Rs 97.67 crore with revenue amounting to Rs 761.23 crore. The market capitalization post-IPO is expected to approach Rs 7,000 crore.

Oswal Pumps is one of the leading players in solar pumps segment. It marked growth in its top and bottom lines. Boost in bottom lines from FY24 onwards is attributed to its shift for solar pump segment. The company will be debt free post IPO and planned expansion will boost its income going forward, said Bajaj Broking.

"Based on its recent financial data, the issue appears aggressively priced. The segment is getting crowded with many corporates entering in this field. Well-informed investors may park funds for medium to long term," it said. "Based on FY24 earnings, the P/E stands at 71.65. Thus, the issue is aggressively priced," the brokerage added.

The company plans to allocate 50% of the shares to qualified institutional buyers (QIBs), 15% to non-institutional investors (NIIs), and 35% to retail investors. The lead managers of the IPO include IIFL Capital Services, Axis Capital, CLSA India, JM Financial, and Nuvama Wealth Management, with MUFG Intime India (Link Intime) serving as the registrar.

Oswal Pumps has witnessed a strong move in its grey market premium (GMP), currently commanding a premium of Rs 85-90 per share. This suggests a potential listing gain of 13-15% for investors, indicating strong market interest. The premium was Rs 50 when the price band was announced.

Oswal Pumps intends to leverage the pump and solar module manufacturing capabilities to capitalise on the growth opportunities provided by the PM Kusum Scheme. It also intend to increase the manufacturing capacity for solar modules and backward integration capabilities for solar modules, said Ashika Stock Broking.

The company has demonstrated solid revenue growth, supported by a focus on operational efficiency and low costs. In terms of the valuations, on the higher price band, Oswal Pumps demands P/E multiple of 24.2x post issue 9MFY25 annualized EPS, adds Ashika.

The anchor book for the Oswal Pumps IPO will open on Thursday, June 12. The shares are expected to be listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) on Friday, June 20. Key aspects of the IPO's appeal include its financial performance and the strategic objectives it seeks to achieve with the raised funds. These elements contribute to its attractiveness in the eyes of investors.

Essential dates for the IPO process include the opening on June 13 and closing on June 17, with the listing tentatively set for June 20. This timeline is pivotal for interested parties to keep in mind as they prepare their investment strategies.