Transrail Lighting is a prominent Indian engineering, procurement, and construction (EPC) company with more than four decades of experience. Specializing in turnkey solutions, the company is engaged in manufacturing lattice structures, conductors, and monopoles. Transrail operates across multiple sectors, including power transmission and distribution, civil construction, poles and lighting, and railways, making it a key player in India's infrastructure development.

IPO Details

The Transrail Lighting IPO is aiming to raise ₹838.91 Crores, which comprises a Fresh Issue of 92.59 Lakh shares worth ₹400.00 Crores and an Offer for Sale of 101.6 Lakh shares amounting to ₹438.91 Crores. The IPO opens for subscription on December 19, 2024 and closes on December 23, 2024.

• Price Band: ₹410 to ₹432 per share.
• Market Capitalization: At the upper price band of ₹432 per share, the market capitalization will be ₹5,799.86 Crores.
• Lot Size: 34 shares, with a minimum investment of ₹14,688 for retail investors and ₹2,05,632 for High Net-Worth Individuals (HNIs).
• IPO Subscription: By December 23, 2024, the IPO was subscribed 80.80 times on its final day, reflecting strong demand.

Financial Performance

As of June 30, 2024, Transrail reported revenues of ₹9,297.04 Million for the period, with a significant growth trajectory over the years. The company's EBITDA was ₹1,340.32 Million, while its Profit after Tax (PAT) stood at ₹517.44 Million. This growth reflects the strong fundamentals of the business.

The company has consistently increased its revenues, from ₹23,571.99 Million in FY 2022 to ₹41,299.99 Million in FY 2024. Similarly, PAT grew from ₹647.07 Million in FY 2022 to ₹2,332.09 Million in FY 2024. These figures highlight the company's ability to scale effectively and generate significant profits.

Valuation and P/E Ratio

The pre-issue EPS for the IPO is ₹19.59, and the post-issue EPS is ₹17.37. With a pre-issue P/E ratio of 22.05x and a post-issue P/E ratio of 24.87x, the company’s valuation is competitive, especially considering the industry P/E ratio of 55.5x. This suggests that Transrail is undervalued relative to its peers, making the IPO potentially attractive for investors looking for value.

The company’s Return on Capital Employed (ROCE) and Return on Equity (RoE) for FY 2024 stand at 24.33% and 24.41%, respectively, indicating a high level of efficiency and profitability.

Grey Market Premium (GMP)

The GMP for the Transrail Lighting IPO is currently at ₹176, suggesting a 40.73% potential listing gain. Although GMP is based on market trends and not regulated by any official stock exchange, it serves as an indicator of the strong investor interest in the IPO. While GMP shows substantial potential for gains, investors should exercise caution as this is not a guaranteed metric.

Anchor Investors

Transrail Lighting has raised ₹245.97 Crores from anchor investors at ₹432 per share, with 56,93,832 equity shares allocated to them. This shows strong institutional interest and further validates the investment potential of the IPO.

Objectives of the IPO

The proceeds from the Fresh Issue will primarily be used for general corporate purposes, while the Offer for Sale proceeds will go to the Selling Shareholders. This distribution suggests that the company is leveraging the IPO to enhance its business operations and capitalize on market opportunities, without diluting its own equity position.

Investment Recommendation

Transrail Lighting is well-positioned in the infrastructure sector, benefiting from its strong track record, diversified business verticals, and growing market demand. The high GMP and strong financial performance indicate that the IPO has substantial listing gain potential.

Given its attractive P/E ratio, solid growth metrics, and potential for long-term growth, we recommend risk-seeking investors to consider applying for the Transrail Lighting IPO for listing gains or as a long-term investment opportunity.

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