Oswal Pumps IPO opens today: Should you subscribe to the issue?

The initial public offering (IPO) for Oswal Pumps commences today, Friday, June 13, with the company offering its shares in a price band of Rs 584 to Rs 614 each. Investors can apply for a minimum of 24 equity shares, and further bids must be in multiples of 24 shares. Bidding will remain open until Tuesday, June 17, allowing interested parties ample time to participate.

This IPO comprises a fresh share issue worth Rs 890 crore and an offer-for-sale (OFS) of up to 81,00,000 equity shares by the promoter, totalling Rs 497.34 crore. At the higher end of the price spectrum, Oswal Pumps aims to raise a total of Rs 1,387.34 crore. The anchor book for this offering was opened yesterday, on Thursday, June 12.

Incorporated in 2003 and based in Karnal, Oswal Pumps is a manufacturer and distributor of a diverse range of pumps, including those for domestic, agricultural, and industrial use. The company has also executed orders for solar pumping systems under the PM-KUSUM Scheme across several Indian states.

The proceeds from this offering will be utilised for capital expenditures, repayment or pre-payment of certain borrowings, investment in its wholly-owned subsidiary—Oswal Solar—and for general corporate purposes. These efforts are expected to bolster the company's market position and operational capabilities.

The IPO has garnered significant interest from anchor investors, raising Rs 416.20 crore through the allocation of 67,78,533 equity shares at Rs 614 each. Notable investors include Societe Generale, BNP Paribas, and ICICI Prudential, among others.

Oswal Pumps' shares are currently commanding a grey market premium (GMP) of Rs 70 to Rs 75 per share, indicating an estimated listing gain of 11% to 12% for investors. This is a decrease from the previous day's GMP of Rs 85 to Rs 90, reflecting some market adjustments.

For the nine months ending December 31, 2024, Oswal Pumps reported a net profit of Rs 216.71 crore on a revenue of Rs 1,067.34 crore. The previous fiscal year saw a net profit of Rs 97.67 crore and revenue of Rs 761.23 crore. The company anticipates a market capitalisation close to Rs 7,000 crore.

The IPO is structured with 50% of shares reserved for qualified institutional buyers (QIBs), 15% for non-institutional investors (NIIs), and 35% for retail investors. This allocation aims to cater to a broad investor base, enhancing participation across different segments.

The offering is expected to provide Oswal Pumps with the financial resources needed to sustain its growth trajectory and expand its market presence, leveraging its diverse product range and established manufacturing capabilities.

IIFL Capital Services, Axis Capital, CLSA India, JM Financial, Nuvama Wealth Management are the book running lead managers of the Oswal Pumps IPO, while MUFG Intime India (Link Intime) is the registrar for the issue. Shares of the company shall be listed at both BSE and NSE with Friday, June 20 as the tentative date of listing. Here's what a host of brokerage say on the IPO of Oswal Pumps:

Anand Rathi Shares & Stock Brokers
Rating: Subscribe for long-term
Oswal Pumps is well positioned to capitalise on strong industry tailwinds with Vertically integrated manufacturing competencies and Strong presence in major agricultural states in India including Haryana and growing presence in other states along with Extensive distribution network catering to a diversified customer base, said Anand Rathi Shares & Stock Brokers.

"At the upper price band, the company is valuing at P/E of 24.2 times, EV/Ebitda of 22.8 times and market cap of Rs 6,998.2 crore post issue of equity shares. We believe that the IPO is fairly priced and recommend a 'subscribe for long term' rating to the IPO," it said.

Canara Bank Securities
Rating: Neutral
Oswal Pumps has demonstrated strong financial growth, with Ebitda expanding at a CAGR of 97 per cent to Rs 150 crore in FY24, while net profit surged at a CAGR of 140 per cent to Rs 97 crore in last three years. However, valuation remains a concern, with the IPO pricing at 63 times PE, exceeding the sector average of 52 times PE, said Canara Bank Securities.

"Revenue concentration poses a risk, with 85.72 per cent of FY24 revenue linked to the PM KUSUM scheme, leading to prolonged receivable cycles, receivables stood at 66.73 per cent of revenue in 9MFY25. Given dependency on government orders and stretched working capital, we give a 'neutral' rating, advising long-term investors to assess risk-reward dynamics, it added.

Arihant Capital Markets
Rating: Subscribe for long-term
Oswal Pump demonstrates solid fundamentals with a strong foothold in the solar agricultural pump segment, underpinned by consistent revenue growth and vertical integration. Its diversified product mix and expanding distribution network reduce market concentration risks and support scale, said Arihant Capital Markets.

"The shift towards direct participation in government schemes may impact distributor-led revenues, it aligns with a strategy to capture higher-margin opportunities. Continued policy support for renewable energy and pump replacement demand provides a favorable long-term industry outlook, positioning the company for steady growth," it said with a 'subscribe for long-term' rating.

Aditya Birla Money
Rating: Subscribe for long-term
Oswal Pump' strategy to spread across broad regions in India’s agricultural, residential and industrial spaces for sustainable pumping solutions and its capacity expansion plan place it at a robust position to undertake near term industry growth and tailwinds, said Aditya Birla Money.

"However, competition from established peers and its dependency on tenders for its revenue, remain key risk factors to consider. The IPO of Oswal Pump is available at a reasonable valuation of 21 times at its annualised 9MFY25 EPS. We have a 'subscribe' recommendation to this issue for the long-term," it added.

BP Equities
Rating: Subscribe
Despite the rise in debt, the comfort remains steady, with a healthy increase in its interest coverage ratio, which rose to 11.2 times between FY22 and 9MFY25, said BP Equities. "The issue is valued at a P/E ratio of 21.2 times on FY25 earnings (annualised), which is relatively cheaper compared to its peers. Considering the above compelling factors, we recommend a 'subscribe' rating."

GEPL Capital
Rating: Subscribe
Oswal Pumps has built a strong domestic presence through a robust network of 925 distributors and 248 exclusive Oswal Shoppes. Backed by a healthy order book of Rs 1,100 crore, the company is well-positioned to capitalize on the industry’s projected 18% CAGR growth by FY30, supported by its strong fundamentals and government initiatives, said GEPL Capital.

"Based on the FY25 annualized earnings relative to the company's post-IPO paid-up capital, the issue is priced at a P/E ratio of 24 times. We believe that the company is fairly valued compared to its peers and has a healthy PAT/revenue/ Ebitda of 140 per cent, 45 per cent and 97 per cent CAGR from FY22 to FY24," it added with a 'subscribe' rating.

SMIFS
Rating: Subscribe
Oswal’s entry into backward-integrated manufacturing of solar modules, cells, EVA sheets, and junction boxes is anticipated to enhance cost efficiency and margins while supporting supply chain security. New product launches, including electric motors, submersible cables, and inverters, are expected to contribute incremental revenues annually in the near term, said SMIFS.

"While Oswal’s current scale is smaller than its largest peers in the industry, its faster growth, higher margins, and product diversification make it a standout in the sector. We recommend subscribe to the issue due to the company offering a unique combination of backward integrations, aggressive capacity expansion and strong market share gains on new product launches," it said.