Strong order book, expansion plans drove IPO timing, says Omnitech Engineering promoter

Omnitech Engineering's maiden issue closes for public subscription today.

• Omnitech Engineering launches Rs 583 crore IPO for expansion
• IPO funds to build two new plants and add high-end machinery
• Order book stands at Rs 1,700 crore with 90% repeat customers

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With an order book of Rs 1,700 crore, precision engineering player Omnitech Engineering is tapping the public markets to fund capacity expansion and new capabilities. The Rs 583 crore issue is a mix of a fresh issue and offer-for-sale. The promoter and CMD Udaykumar Parekh spoke about valuations, working capital trends, and client concentration concerns.

Q: What is the rationale behind coming to market right now?

A: We have a strong order book of Rs 1,700 crore, a 90% repeat customer base, and have added 100+ new customers in the last three to four years. IPO proceeds will fund two new plants and high-end machinery to expand capacity and capabilities.

Q: Analysts say the issue is fully priced. Would you redo your valuations?

A: We took market feedback from several anchor investors. Compared to our peers in similar engineering businesses, they trade at significantly higher PE multiples. Our infrastructure and capabilities are at par with peers.

Q: The energy segment now makes up about 50% of H1 revenue, while motion control and industrial equipment are losing share. Why?

A: In absolute numbers, motion control, automation, and industrial equipment revenues are still growing. Energy is simply growing at a faster pace, which is why its percentage share has increased. We have a strong order book across all three segments.

Q: Capacity utilization is between 63–70%. Why are you investing in new facilities now?

A: Our high-precision engineering plants take 9 to 15 months to establish. Based on our growth projections, current plants will be fully utilized by FY27, and new capacity from IPO proceeds will be ready by Q1 FY28 which is when we'll need it.

Q: Client concentration is high, with one customer holding a Rs 1,038 crore order. How are you de-risking this?

A: Our top customer contributes about 30% of H1 revenues, and the top 10 contribute about 56%. Within each segment, we have multiple customers. Even within that one large client relationship, we supply across different product lines, which provides internal diversification. Segment-wise, around 40-30-30 percent revenue split keeps the risk profile low.

Q: The US makes up about 60% of revenue. Have tariffs impacted you?

A: Our business model is based on ex-works pricing, so tariffs are not within our cost scope. More importantly, our product development cycles are 8 to 16 months long, including pressure testing and approvals. Our customers are multi-billion dollar companies that take a 5 to 10 year strategic supply chain view and they cannot and do not shift suppliers due to short-term tariff changes.

Q: You're planning to enter defense, semiconductor, aerospace, and railways. Why these segments?

A: We regularly add new revenue streams to supplement existing segment growth. Energy, for example, was added in 2016 and is now a significant segment. Defense and aerospace are similarly high-growth areas, aligned with Make in India initiatives. We have already received some orders and approvals from defense customers.

Q: Working capital has stretched from 139 days in FY23 to 283 days in FY25, and operating cash flow turned negative. What's driving this?

A: The primary driver was our new plant commissioned in FY24, which caused revenues to jump from Rs 178 crore to Rs 343 crore, which is roughly 85–90% growth. Scaling up requires buying raw materials at minimum order quantities (MOQs) from suppliers, which temporarily inflates inventory.

As revenues ramp up, this inventory gets absorbed. Working capital has already improved from 283 days to 256 days in FY26, and we expect it to normalize toward the historical range of 180-200 days. Our operating cash flow, which was positive in FY23 and FY24, turned negative in FY25 due to this ramp-up, and we expect it to return to positive in FY26.