The promoter holding would drop to 70.6% post-IPO from 80.67%. Long-term investors may consider the IPO owing to earnings visibility in the energy efficiency product segment. The company’s ability to develop products in lower lead time, the potential for margin expansion, and likely incremental revenue from electronic manufacturing services are draw cards for the IPO.
Business model: Nasik-based Rishabh, promoted by an IIT alumnus, manufactures a wide range of cost-effective products to measure, record, analyse and optimise energy and processes to improve energy efficiency. The company manufactures products such as analogue panel meters, transducers, temperature controllers, and power quality recorders. The company is a global leader in the manufacturing and supply of analogue panel meters. The company’s products are used in industrial (FMCG, pharmaceutical, cement, steel, railways), power (generation, transmission and distribution, renewable energy, oil and gas), OEM industries (transformer, motor, cable and special machine manufacturers) and new applications (data centre, laboratories, semiconductors, consumer electronics, and building automation). It has manufacturing units in India, Poland and China and derives 66% of revenue from its overseas operations. ABB, L&T Electrical & Automation, Siemens, and Hitachi Energy are leading customers.
Financials: Revenue grew annually by 21% to ₹567 crore between FY21 and FY23 and operating profit expanded by 11% to ₹86 crore in the same period. The operating margin of the company was 240 basis points in the last fiscal year due to higher procurement costs for semiconductors and higher gas prices at its aluminium die-casting factory in Poland owing to geopolitical tensions. Consequently, the profit remained unchanged at ₹49.6 crore in FY23 compared with the last fiscal year, however, it grew at a rate of 11% between FY21 and FY23. The debt-to-equity ratio dropped to 0.26 in FY23 compared with 0.35 in FY21. The company had borrowings of ₹102.8 crore at the end of FY23.
Risk: The company derives a significantly high proportion of revenue from global industrial customers. Any slowdown in new orders due to GDP moderation may weigh on the financials of the company. In FY23, one facility in Poland accounted for 63% of the total production of 16.21 million units. A bulk of customers do not commit to long-term contracts; therefore, any cancellation or deferment of orders may impact its financials.
Valuation: At the higher end of the price band, the company demands a price valuation of 33 times its FY23 earnings. Given a wide range of product segments such as electrical automation, metering control, portable testing, solar inventors and aluminium die-casting, there are no direct listed peers. Automation companies ABB, Siemens, and Schneider Electric trade at 66-83 times their historical earnings, while Endurance Technologies which has an 8% market share in India’s aluminium die-casting business trades at 49 times.