Transrail Lighting IPO

Transrail Lighting has completed over 200 projects in the power transmission and distribution sector. The company claims to possess extensive project execution capabilities, including skilled manpower, material supply (featuring self-manufactured products), and advanced machinery, both domestically and internationally.

The company has established a presence in 58 countries, including Bangladesh, Kenya, Tanzania, Niger, Nigeria, Mali, Cameroon, Finland, Poland, and Nicaragua, through turnkey EPC projects and supply-based ventures.

As of June 30, 2024, Transrail Lighting has executed EPC contracts for 34,654 circuit kilometres (CKM) of transmission lines and 30,000 CKM of distribution lines across domestic and international markets. The company also provides EPC services for substations with capacities of up to 765 kilovolts (kV).

Transrail Lighting's facilities are ISO 9001:2015 certified for quality management systems, ISO 14001:2015 certified for environment management systems, ISO 27001:13 certified for communication security systems, and ISO 45001:2018 certified for occupational health and safety management systems.

The company claims that the manufacturing facilities are equipped with advanced technology, including CNC machines, plasma/gas-cutting machines, shearing machines, welding systems, large galvanising baths, wire drawing machines, and furnaces. As of June 30, 2024, the company has supplied 1.3 million metric tonnes (MMT) of towers, 194,534 kilometres of conductors, and 458,705 poles.

The company also claims to operate a state-of-the-art tower testing facility capable of testing towers up to 85 meters in height and up to 1,200 kV. By June 30, 2024, it had tested 486 towers in-house, totalling approximately 12,500 metric tonnes (MT). These tests included self-support towers, guyed towers, monopoles, railway portals, and telecom masts. Over half of these towers were for international clients from countries such as Canada, Mexico, Malaysia, the Philippines, Korea, Oman, Chile, Italy, Botswana, Nigeria, Ethiopia, Mozambique, Bangladesh, Cameroon, and Liberia.

The company's tower manufacturing and testing facility in Deoli, Maharashtra, and its pole manufacturing unit in Silvassa, Dadra, and Nagar Haveli, are CE-certified, while all in-house testing facilities are NABL-accredited.

The company has seen a consistent increase in revenue from operations and profit after tax (PAT). Revenue from operations increased from Rs 2,284.14 crore in FY22 to Rs 3,086.14 crore in FY23 to Rs 4,009.23 crore in FY24. PAT increased from Rs 64.71 crore in FY22 to Rs 107.57 crore in FY23 to Rs 233.20 crore in FY24.

Transrail Lighting's project management and turnkey EPC contracts, including those in the power transmission and distribution sectors, involve long execution periods. Any delays and time overruns can lead to deviations in estimated costs and revenues, which could negatively impact the company's financial condition and operations.

The company's business depends on tenders issued by government authorities, public sector undertakings, and utilities, which account for a significant part of the revenue from operations. Government clients contributed Rs 624.27 crore (69.60%) for the three months ended June 30, 2024, and Rs 3,313.95 crore (82.66%), Rs 2,541.46 crore (82.35%), and Rs 1,850.97 crore (81.04%) in FY24, FY23, and FY22, respectively. Any delays or absence of tenders from these entities could materially impact the company's operations and financial results.

Transrail Lighting was previously a subsidiary of Gammon India Limited (GIL) and is therefore responsible for any pending legal proceedings. Any adverse judgments in these proceedings against GIL could harm the company’s reputation, adversely affecting its business.

The company is involved in a First Information Report (FIR) filed by the Central Bureau of Investigation (CBI), Anti-Corruption Bureau, Lucknow, Uttar Pradesh, concerning the Gomti River Project. Any adverse developments or judgments in this matter could harm the company’s prospects and reputation.

The company is dependent on its manufacturing facilities for smooth operations. Any disruptions, breakdowns, or shutdowns of its manufacturing facilities could severely affect its business operations and financial performance.

The company, its promoters, directors, subsidiaries, and group entities are involved in certain legal proceedings. Any adverse judgments in any of the cases could be detrimental to the company’s business prospects.

A substantial portion of the company's revenue comes from international clients, especially from Bangladesh, Mali, and Niger, which contributed 29% to the revenue from operations for the three months ended July 30, 2024. Apart from this, in total foreign clients contributed Rs 447.44 crore (49.89%) of revenues for the three months ended June 30, 2024, and Rs 2,347.31 crore (58.55%), Rs 1,647.30 crore (53.38%), and Rs 867.11 crore (37.96%) in FY24, FY23, and FY22, respectively. Any challenges in managing risks associated with foreign operations could negatively affect its business, client relationships, and assets in these countries.

The company relies heavily on a few key customers for its revenue. The top 10 customers contributed Rs 605.05 crore (67.46%) for the three months ended June 30, 2024, and Rs 3,122.85 crore (77.89%), Rs 2,695.58 crore (87.34%), and Rs 1,904.93 crore (83.40%) in FY24, FY23, and FY22, respectively. Any loss of any of these customers or a decline in demand from them could adversely affect the company's operations and financial performance.

As of September 30, 2024, the company's total outstanding borrowings amounted to Rs 5,768.93 crore. Any inability to repay or service these loans could adversely affect the company’s financial position.