Atlanta Electricals IPO — Should You Subscribe Or Avoid? Read Anand Rathi's Report For Key Issue Details

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Anand Rathi Report

Atlanta Electricals Ltd. is set to open today and the offer closes on Sep 24. The manufacturers of power, auto, and inverter duty transformers in India has set the price band in the range between Rs 718 and Rs 754 per equity share.

The Rs 687-crore IPO comprises a fresh issue of shares of Rs 400 crore and an offer for sale of 38 lakh equity shares valued at Rs 287 crore. Investors can place bids starting from a minimum of 19 shares and in multiples thereafter.

Motilal Oswal Investment Advisors Ltd., Axis Capital Ltd. are the book-running lead managers for the public issue while MUFG Intime India Pvt. Ltd. is the registrar to the offer.

Objects of the Issue

1. Repayment of certain borrowings availed by the company.

2. Funding working capital requirements and general corporate purpose.

Strengths:

• One of the leading manufacturers of power, auto and inverter duty transformers in India, well-positioned to capture the industry tailwinds.

• Broad and diversified product portfolio with focused product development tailored to meet the customer requirements.

• Strong Order Book coupled with well diversified customer base.

• Manufacturing capabilities with focus on quality and high level of regulatory compliance and health and safety measures.

Key Strategies:

• Capital expenditure to achieve capacity expansion and focus on being backward integrated.

• Continue to expand their customer base beyond India and increase wallet share.

• Increase market share with improved utilisation levels.

• Continue to enhance their brand through innovative and focused marketing initiatives.

Valuation:

Atlanta Electricals is among the prominent manufacturers of power, auto, and inverter duty transformers in India. Its wide-ranging and diversified product portfolio is supported by continuous innovation and focused product development. Solutions are designed to align with specific customer requirements, ensuring flexibility and reliability.

A robust order book provides strong visibility for future growth and operational stability. The company also benefits from a well-spread customer base across multiple industries and regions. Its advanced manufacturing facilities emphasize superior quality, efficiency, and technological excellence. At the upper price band company is valuing at P/E of 48.8x to its FY25 earnings, with EV/Ebitda of 30.1x and market cap of Rs 57,975 million post issue of equity shares.

We believe that the IPO is fully priced and recommend a “Subscribe-Long Term” rating to the IPO.

Key Risk:

• A significant portion of revenue is generated from manufacturing of transformers at facilities situated in Gujarat. As of Fiscal 2025, Fiscal 2024 and Fiscal 2023, they derived 98.88%, 96.83% and 89.97% respectively, of their revenue from manufacturing facilities situated in Gujarat. Any disruptions in the region could have a material adverse effect on their business, financial condition and results of operations.

• Company derive a significant portion of their revenue from the supply of transformers to utilities including state electricity companies who constituted 65.85%, 65.46% and 80.47% of their revenue from operation during Fiscal 2025, Fiscal 2024 and Fiscal 2023. Additionally, their business is largely dependent upon the demand for power generation, transmission and distribution which is closely linked to Government policies. Any economy downturn or change in government policy may have an adverse impact on their business, financial condition, cash flows and results of operations.

• A significant portion of their revenue is derived from government-controlled entities, who follow the tendering process for determination of suppliers. The success rate of their company for Fiscals 2025, 2024 and 2023, is 18.00%, 29.03% and 25.42% respectively. Company may be adversely affected if they do not succeed in all or a majority of the contracts that they tender for.  Order Book may not be representative of their future results and their actual income may be significantly less than the estimates reflected in their Order Book, which could adversely affect their business, financial condition, results of operations and prospects.

• Company have in the past entered into related party transactions and may continue to do so in the future, which may potentially involve conflicts of interest with the equity shareholders.

• Company depend on their relationships with customers. A substantial portion of revenues is dependent on their top 10 customers. As of Fiscal 2025, Fiscal 2024 and Fiscal 2023, company derived 74.21%, 64.82% and 79.87% respectively, of their revenue from their top 10 customers. The loss of any of these customers, will materially and adversely affect their revenues and profitability.

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