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The global power transmission sector is surging, projected to grow at a healthy 8% annually. And India’s HVDC and FACTS market is projected to expand from $1.4 billion in 2024 to $9.2 billion by 2028. This shifting landscape creates an appealing opportunity for companies that specialize in these key technologies. Quality Power Electrical Equipments Limited, a leading participant in HVDC and FACTS, plans to raise ₹859 crore through an initial public offering.
But is quality power IPO a good investment for your portfolio?
In this blog, we’ll delve into the key details, financial performance, peer comparison, sector outlook, risk factors, and, most importantly, whether you should subscribe to this Quality Power IPO.
Quality Power IPO is open for subscription from (14th Feb 2025) today onwards!
Quality Power IPO Details:
- IPO Open Date 14th February 2025, Friday
- IPO Close Date 18th February 2025, Tuesday
- Price Band ₹401 to ₹425 per share
- Lot Size 26 shares
- Face Value ₹10 per share
- Issue Size at upper price band ₹859 crore (Fresh Issue ₹225 crore and Offer for Sale ₹634 crore)
- Listing exchanges NSE, BSE
- Cut-off time for UPI mandate confirmation by 5 PM on February 18, 2025
The tentative timeline for the IPO is as follows:
- Basis of Allotment 19th February 2025, Wednesday
- Initiation of Refunds (if not allotted) 20th February 2025, Thursday
- Credit of Shares to Demat (if gets allotments of shares) 20th February 2025, Thursday
- Listing Date 21st February 2025, Friday
About the Company
Quality Power Electrical Equipments Limited, founded in 2021, is a global manufacturer of HVDC (High Voltage Direct Current) equipment and FACTS (Flexible Alternating Current Transmission Systems) networks enabling energy transition from renewable sources to traditional power grids. The company offers a wide range of products for power transmission and advanced power automation like reactors, transformers, line traps, instrument transformers, capacitor banks, converters, harmonic filters and reactive power compensation systems. They also provide grid interconnection solutions like STATCOM (Static Synchronous Compensator) and SVC (Static Var Compensator) technologies. The company serves in India and internationally. Their domestic operating facilities are in Sangli, Maharashtra and Aluva, Kerala, while their international operating facilities are located in Ankara, Turkey. It operates in two key business segments:
- Power Products: This includes reactors, line traps, transformers, instrument transformers, line tuners, metal-enclosed capacitor banks and composites.
- Power Quality Systems: This segment includes static VAR compensators, STATCOMs, Harmonic Filters, Capacitor Banks and shunt Reactors.
Let’s look at the revenue breakup.
Sector Outlook in India
The global electricity demand is projected to rise, primarily driven by the growth in wind, solar, natural gas and nuclear energy sectors, along with increased residential, commercial, and industrial activities and the adoption of electric vehicles. Transmission lines, which carry electricity over long distances from power plants to local distribution networks, are essential for meeting this growing demand, especially in integrating renewable energy into the grid. The transmission sector has grown at a CAGR of 8%, from $78,736 mn in CY19 to $105,903 mn in CY23. Going forward, the global transmission line market is expected to undergo significant transformation as the focus shifts towards more sustainable, energy-efficient sources. Crossborder transmission lines and power trade, particularly in ASEAN (Association of South East Asian Nations) countries, are set to drive investments in the energy transition and power technologies sector.
HVDC is used for transmitting bulk power over long distances using direct current, which is more cost-effective and results in less energy loss compared to AC (alternating current) transmission. Key benefits of HVDC include reduced system costs, lower power losses and no skin or proximity effects. FACTS devices are used in AC transmission systems to manage power flow, control voltage, improve stability and reduce oscillations. The global market for HVDC and FACTS grew at a CAGR (compounded annual growth rate) of 11%, from $10,162 mn in FY19 to $13,217 mn in FY23. Further, The HVDC and FACTS market in India grew at a CAGR of 7%, from $576 mn in CY19 to $743 mn in CY23.
Financial Performance of the Quality Power IPO
Quality Power Electrical Equipments Limited has shown consistent financial growth over the past three years. The company’s revenue and profit have shown steady growth from 2022 to 2024, with Revenue from Operations rising from ₹183 crore to ₹301 crore and Net Profit increasing from ₹42 crore to ₹55 crore. Expenses, especially raw material costs, have also grown, but profitability remains stable. For six months ending September 30, 2024, revenue stands at ₹156 crores, and net profit is ₹50 crore, indicating strong performance and efficiency improvements.
Quality Power Electrical Equipments Limited stands out among its competitors, including GE Vernova T&D India Limited, Hitachi Energy India Limited, and Transformers & Rectifiers (India) Limited. It has the highest EBITDA margin of 12.7% and a PAT margin of 16.7%, showcasing strong profitability. Additionally, it leads to capital efficiency with an ROCE of 19.2%, the highest in the group. Despite having the smallest market cap of ₹3,291 crore and the lowest revenue at ₹301 crore, the company maintains a competitive valuation with a P/E ratio of 59.3x.
Objectives of the Issue
The primary aims of the Quality Power IPO are to strengthen the company’s financial position, promote operational growth, and improve overall efficiency.
- Payment of the purchase consideration for the acquisition of Mehru Electrical and Mechanical Engineers Private Limited
- Funding the capital expenditure requirements for the purchase of plant and machinery
- Funding inorganic growth through potential acquisitions, other strategic initiatives and general corporate purposes
Let’s now look at the risk factors of the Quality Power IPO.
Risk Factors
While the Quality Power IPO appears promising, investors should consider the following risks:
- Heavy Dependence on International Markets: 81% of revenue comes from overseas, making the company vulnerable to global economic changes.
- Customer Concentration Risk: The top 10 customers contribute 58% of revenue.
- High Valuation: With a P/E of 59.3x, the stock may be expensive compared to some peers.
- Regulatory and Market Risks: Growth depends on government policies and infrastructure spending.
Should you subscribe to the Quality Power IPO?
Quality Power Electrical Equipments Limited has strong financials, operates in a high-growth sector, and has a solid return on capital employed. However, investors should consider the risks of global dependence, valuation concerns, and customer concentration. Before making a choice, carefully consider your risk tolerance and investing objectives.
Before investing in the Quality Power IPO, you should carefully consider the potential benefits and associated risks. StockEdge’s expert panel rated the IPO “average”, indicating that the opportunity is balanced and cautious.
For more detailed information, we’ve created a comprehensive Quality Power IPO Note, which includes a deep dive into the company’s financials and a SWOT analysis, helping you understand its growth potential.
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