Transrail Lighting IPO: Price Band Set at ₹410-₹432, valuation at ₹5,800 crore: Peer Comparison Insights

Transrail Lighting IPO is a combination of a fresh issue worth ₹400 crore and an offer for sale of ₹439 crore, totalling ₹839 crore. The subscription opens on December 19, 2024 and closes on December 23, 2024. The price band is set between ₹410-₹432 per share, at the upper price band valuing the company’s market capitalisation of around ₹5,800 crore.

The Indian power transmission and distribution system has witnessed tremendous growth with the length of domestic transmission lines expanding from 413,407 circuit kilometres in FY19 to 485,544 circuit kilometres in FY24. Further, India has the second-largest road network in the world, spanning 6.30 million kilometres. This extensive network of roads includes highways and expressways which are key demand drivers for the high mast lighting in India.

This demand for high masts is anticipated to be supportive. More than 20 expressways are planned across the country with the award of approximately 5,000 kilometres of highways every year over the next five financial years, according to the report of Crisil.

Incorporated in 2008, Transrail Lighting Ltd is an Indian engineering, procurement and construction (EPC) company. It focuses on power transmission and distribution business and integrated manufacturing facilities for lattice structures, conductors, and monopoles.

Transrail Lighting has completed more than 200 projects in power transmission and distribution verticals to date. Its business is divided into four verticals -

1. Power transmission and distribution (83.83% revenue for FY24),
2. Civil construction (9.33% revenue for FY24),
3. Poles and lighting (4.4% revenue for FY24), and
4. Railways (2.43% revenue for FY24)

In the listed space, Transrail Lighting has peers such as Kalpataru Projects International, KEC International, Skipper, Bajel Projects, and Patel Engineering.

Peer-to-Peer Comparison for Transrail Lighting Ltd

Transrail Lighting among listed peers has a strong return on networth of 21.68%, much higher compared with KEC International and Kalpataru Project. Transrail has a high earning per share of 19.59 per share only next to Kalpataru Project’s 31.76 per share. The company’s financial position indicates operational efficiency making it an important player in the infrastructure and power transmission sector.

A Glance at Listed Peers

Kalpataru Project (since 1984) and KEC International (since 1945) are the leading players in power T&D, and civil works with KEC having a global presence in more than 70 countries. Skipper (since 1981) is engaged in T&D structure and engineering exports, while Bajel Projects (since 2022) provides EPS services with a limited global presence.

Patel Engineering (since 1949) primarily operates in India with a focus on dams, tunnels, and hydro projects. Whereas, Transrail operations are spread over more than 50 countries across Asia, America, Europe and Africa.

Comparison of Financial Indicators for FY24

In FY24, Transrail's PAT margins stood at 5.7%, which is the second best among peers only next to the Patel Engineer’s 6.6%. Transrail maintains a low debt-to-equity ratio of (0.56x) compared to its peers KEC International (0.83x) and Kalpataru Projects (0.63x). But higher than Skipper, Patel Engineers and Bajel Projects.

On the other hand, Transrail witnessed growth in revenue of 29.32%. However, among listed peers, Skipper and Bajel Projects reported 65.70% and 76.20% growth.

Comparison of Operational Indicators for FY24

During FY24, Transrail outperformed its peers in operational efficiency, achieving the highest return on capital employed (ROCE) at 24.33%, followed by KEC International at 23.9%. Its working capital cycle of 73 days is the shortest among peers, compared with Bajel (110 days), and Patel Engineering (145 days).

Transrail’s EBITDA of ₹478 crore (11.71%) has the best operating margin among peers only, with only Patel Engineering (17.1%) surpassing it in percentage terms.

Transrail Lighting’s IPO looks promising considering the attractiveness of the sector supported by government policies. The existing players in the sector are already commanding premium valuations. Transrail Lighting outperforms its peers in terms of ROCE (24.33%) and RONW (21.68%). However, its peers operate in the same industry and may have similar offerings or end-use applications. But they are different in terms of business models, product verticals or geographical presence.