Transrail Lighting IPO: MD and CEO says confident of double-digit growth, order book healthy

Transrail Lighting IPO

The IPO market remains buoyant despite a correction in the secondary market. One such issue that has seen brisk demand from investors is Transrail Lighting. The Rs 840 crore IPO, priced between Rs 410-432 per share is open for subscription and was fully subscribed within hours of opening.

In an interaction with Moneycontrol, Randeep Narang, the Managing Director and CEO of Transrail Lighting shared insights into company's business model, financials and growth plans.

Here are the edited highlights from the interaction.

Business model and revenue mix

Transrail Lighting operates as an EPC (Engineering, Procurement, and Construction) company focusing primarily on the power transmission and distribution (T&D) segment. The company derives 83-84% of its revenue from T&D, around 10% from civil construction, 2-3% from railways, and the remainder from poles and lighting.

“A significant 60% of our business comes from international markets, where we focus solely on T&D projects. The rest is from the domestic market,” said Randeep Narang. The company's backward integration into tower and conductor manufacturing provides a competitive edge in both domestic and global markets.

Also Read: IPO GMP update : DAM Capital, Transrail, Mamata Machinery premiums soar

Risk mitigation in geopolitically sensitive regions

The company’s international exposure spans 22 countries, including regions like Africa, Bangladesh, Kenya, and Nigeria, which are geopolitically sensitive. Narang said Transrail Lighting employs a stringent risk assessment matrix covering political, geographical, financial, tax, and labour law risks.

“For international projects, especially in Africa, we work with multilateral funding agencies like the World Bank and the Asian and African Development Banks. This ensures timely payments and mitigates financial risks,” said the CEO.

"...there could be a delay if there is some kind of a slowdown in the economy or in the country's political environment, but that's a three to four months cycle. We have not seen any delays which are really troublesome for us," he added.

Key clients and execution challenges

The company collaborates with top PSUs in India and leading private clients. Internationally, it works with major power utilities. Regarding material availability, particularly transformers, Narang noted no significant challenges.

“We’ve successfully executed projects in Mali and Nicaragua and managed domestic supplies as well,” said the CEO of Transrail Lighting.

Fund utilisation

A major portion of the IPO’s fresh issue, approximately Rs 400 crore, is allocated to fund working capital needs. Transrail Lighting’s growth trajectory has been strong, with a 30% annual revenue increase between FY22 and FY24 and a 90% annual profit growth over the same period.

“With a healthy order book of Rs 10,000 crore and Rs 3,200 crore in L1 orders, we are well-positioned for sustained growth. Our backward integration, especially in conductor and tower manufacturing, further strengthens our margin profile,” CEO Narang said.

Free cash flow and margins

Transrail Lighting confirmed that the company is in the positive zone for cash flows and anticipates free cash flow generation in the near future. The company achieved an 11.77% margin last year and aims to maintain double-digit margins, currently tracking at 13% in Q1 FY25.

Competitive landscape and capex plans

Transrail Lighting operates in a competitive EPC market but differentiates itself through quality manpower, robust processes, and backward integration. The company plans to invest Rs 90 crore from the IPO proceeds into expanding its existing tower and conductor factories. This includes a focus on high-tension low-sag (HTLS) conductors, which will cater to both EPC and product businesses.

Geographical Expansion

The company plans to deepen its presence in existing international markets while expanding to new regions like Australia and the US. “Our strategic pivot to international markets three to four years ago has paid off significantly,” said Narang.

With a clear and fair focus on sustainable growth, as evidenced by the company's track record, Narang remains confident in its ability to continuously deliver value to shareholders.

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