Will Atlanta Electricals IPO deliver long-term gains to investors?

Synopsis

Atlanta Electricals, a transformer manufacturer, is launching an IPO to raise ₹400 crore for expansion and debt repayment, alongside a ₹287 crore offer for sale. While the company boasts a strong order book and growing revenue, its operating margin lags behind peers, and it faces high customer concentration. Investors with a higher risk tolerance might find this IPO appealing.

ET Intelligence Group: Atlanta Electricals, a manufacturer of transformers, plans to raise ₹400 crore in fresh equity to fund capacity expansion and repay debt, and ₹287 crore through an offer for sale. The promoter stake will fall to 87.3% after the IPO from 94.4%. The company has a strong order book and has expanded capacity to take advantage of rising demand. However, its operating margin is lower than peers. It also has a high client concentration. Given these factors, investors with a higher risk appetite may consider the IPO.

Business

Incorporated in 1988, Gujarat based Atlanta Electricals manufactures a variety of transformers including power, inverter duty, furnace, generator, and special duty. It has a production capacity of 500 Mega Volt-Amp (MVA). The company operates five manufacturing facilities, with four currently functional, located in Anand, Bengaluru, Vadod, and Ankhi. As of March 31, 2025, Atlanta Electricals serves a diversified customer base of 208 clients, including 21 public sector undertakings and 187 private players across sectors such as transmission, renewables, steel, and infrastructure. Its order book has nearly tripled to ₹1,642.9 crore at the end of March 2025 from ₹534 crore in FY23.

Agencies

Financials
Revenue grew by 19% annually to ₹1,244.2 crore in FY25 from ₹873.9 crore in FY23. Earnings before interest, taxes, depreciation, and amortisation (Ebitda) rose to ₹199 crore in FY25 from ₹123 crore a year earlier after falling from ₹143 crore in FY23. The Return on Equity (ROE) improved to 33.9% from 27.8% a year ago but fell from 53.1% in FY23. Atlanta's Ebitda margin of 16.1% for FY25 was lower than 18-23% for peers. The company faces significant customer concentration risk with top 10 customers accounting for 74% of FY25 revenue. Also, it heavily relies on state government-controlled utilities and tender-based contracts which formed 66% of revenue in FY25.

Valuation

The company demands a trailing price-earnings (P/E) multiple of 49. Peers including Voltamp Transformers and Danish Power trade at P/Es of 22 and 26 respectively. They reported FY25 revenues of ₹1,934 crore and ₹427 crore in that order. Transformers and Rectifiers India, the largest peer with FY25 revenue of ₹2,019 crore, commands a much higher P/E of 70.

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