Kanohar Electricals IPO: A High-Margin Transformer Maker With a 2.8x Revenue Order Book Taps the Markets - Should You Subscribe?

At a Glance

Company and its Business Operations

Kanohar Electricals Limited, incorporated on November 13, 1972 as Kanohar Electricals Private Limited and converted into a public limited company on December 22, 1994, is headquartered at Rithani, Meerut, Uttar Pradesh. It is one of the leading domestic transformer manufacturers by revenue in Fiscal 2026 and one of only five Indian companies holding short circuit test certification for 500 MVA 400 kV Transformers, having tested over 200 ratings. It operates two segments, Transformer Manufacturing at 83.43 per cent of Fiscal 2026 revenue and EPC at 16.44 per cent, spanning power, traction, Scott and distribution transformers and shunt reactors. Named customers include BNC Power Projects Limited, Blue Star Limited and Bhutan Power Corporation Limited. It runs two Meerut facilities at Rithani and Gangol with 19,200 MVA installed capacity. Revenue compounded at 53.72 per cent over Fiscals 2024 to 2026.

Industry Outlook

India's transformer market expanded from USD 3,691.4 million in CY19 to USD 4,944.9 million in CY25, a CAGR of 5.0 per cent, aided by wider electrification and fresh infrastructure build-out. The TAM is projected at USD 6,854.2 million by CY30, implying a faster 6.7 per cent CAGR over CY25 to CY30, as per the CARE Report. Globally, the market is estimated to grow from USD 47,527 million in CY25 to USD 63,892 million by CY30. Three structural drivers anchor the India opportunity: the National Electricity Plan (Transmission) and Green Energy Corridors aligned to the 500 GW renewable energy target; Railway electrification under the National Rail Plan 2030, which lifts traction and Scott transformer demand; and replacement of ageing urban and industrial transformers, reinforced by Make in India localisation of transformer manufacturing.

Objects of the Issue

• The offer is a combination: Fresh Issue of Rs 300.00 crore and Offer for Sale of Rs 755.74 crore at the upper band, aggregating Rs 1,055.74 crore.
   
• Offer for Sale: K Sons Family Trust, Promoter Selling Shareholder, offering up to 1,19,57,915 equity shares.
   
• Fresh Issue deployment: Rs 64.18 crore towards capital expenditure at the Gangol Manufacturing Facility covering new machinery, an office building, Solar plants and electric vehicles, Rs 155.00 crore towards incremental working capital; balance of around Rs 80.82 crore towards general corporate purposes and issue expenses.
   
• Overall purpose: capacity expansion, backward integration, working capital funding and a partial exit for the promoter trust.

SWOT Analysis

Strengths

• One of only five Indian manufacturers with short circuit test certification for 500 MVA 400 kV transformers, and one of two certified for 100 MVA 220 kV Scott transformers.
• EBITDA margin expanded from 11.23 per cent in Fiscal 2024 to 27.59 per cent in Fiscal 2026.
• RoE of 42.12 per cent and RoCE of 70.13 per cent in Fiscal 2026, among the strongest in the listed peer set.

Weaknesses

• Top 10 customers contributed 93.16 per cent of Fiscal 2026 revenue from operations.
• Cash flow from operations of Rs 25.84 crore in Fiscal 2026 against profit after Tax of Rs 129.73 crore, with Fiscal 2024 CFO negative at Rs 16.32 crore.
• Trade receivables of Rs 210.79 crore equal 32.24 per cent of Fiscal 2026 revenue, with net working capital at 107 days.
• Capacity utilisation of only 45.99 per cent in Fiscal 2026, with the Rithani unit at 0.25 per cent.

Opportunities

• India transformer TAM of USD 6,854.2 million by CY30, growing at 6.7 per cent CAGR.
• Government sector accounts for 93.62 per cent of the Order Book, aligning the company to National Electricity Plan and railway electrification spending.
• Gangol capex funded by Rs 64.18 crore of Net Proceeds to lift capacity beyond the current 19,200 MVA.
• Shunt reactors scaled from nil order book in Fiscal 2024 to Rs 248.16 crore in Fiscal 2026, opening the renewable grid segment.

Threats

• Top 10 suppliers accounted for 71.49 per cent of cost of goods sold in Fiscal 2026, with no long-term supply agreements.
• Exposure to copper and imported CRGO steel price volatility, with cost of materials consumed at Rs 371.38 crore in Fiscal 2026.
• Both manufacturing facilities are concentrated in Meerut, Uttar Pradesh.
• Competition from far larger listed players with revenue up to Rs 33,782.18 crore in Fiscal 2026.

Financial Performance

All figures in Rs crore. Margins in per cent. Source: RHP (Restated Consolidated Financials).

(a) Profit & Loss

(b) Balance Sheet

(c) Working Capital & Cash Flow

Peer Comparison

Outlook & Relative Valuation

Apply. At the upper band of Rs 632, Kanohar Electricals is valued at 36.26x Fiscal 2026 diluted earnings, near the floor of the listed-peer range of 32.19x to 159.55x, with an RoNW of 34.80 per cent and an EBITDA margin of 27.59 per cent that comfortably exceed the peer median. The qualitative case rests on scarce certifications in 500 MVA 400 kV and Scott transformers, a government-heavy order book of Rs 1,818.32 crore at 2.78x Fiscal 2026 revenue, and 45.99 per cent capacity utilisation that permits volume growth without proportionate outlay. Fresh proceeds of Rs 300 crore fund Gangol capex of Rs 64.18 crore and working capital of Rs 155.00 crore. Risks worth considering, customer concentration at 93.16 per cent, supplier concentration at 71.49 per cent of cost of goods sold, and weak cash conversion with CFO of Rs 25.84 crore against profit after tax of Rs 129.73 crore. Post-issue P/E of 38.58x narrows valuation comfort. Overall, we recommend investors may Apply for listing gains.