Inside Sedemac’s IPO: EV dilemma, TVS dependence, profit jump, and its R&D-driven engine

Here are the key takeaways from the DRHP.

The financial jolt, a surge in profitability

Sedemac has reported steady top-line growth. Revenue from operations rose from Rs 423 crore in FY23, to Rs 530.65 crore in FY24 and to Rs 658.36 crore in FY25. For the June 2025 quarter, revenue stood at Rs 217.35 crore.

The bottom line, however, shows a sharper swing. Profit after tax moved from Rs 8.57 crore in FY23 to Rs 5.88 crore in FY24, then jumped to Rs 47.04 crore in FY25. The June 2025 quarter alone delivered Rs 17.07 crore in profit.

A major reason for this surge is a steep drop in finance costs. Borrowing expenses fell from Rs 38.44 crore in FY24 to Rs 12.03 crore in FY25, following a significant reduction in total borrowings—from Rs 108.26 crore to Rs 23.93 crore. The deleveraging gives Sedemac a cleaner balance sheet at a time when many hardware-heavy companies come to market with high debt loads. The company continues to carry large depreciation and amortisation charges, reflecting a capital-intensive, R&D-driven operating model.

The elephant in the room: Electrification risk

For a company deeply tied to ICE-driven mobility, the accelerating shift to electric vehicles is a structural risk. The DRHP states clearly that Sedemac’s growth depends on the pace at which ICE platforms continue to dominate Indian and global markets.

The company has begun supplying products for the electric two- and three-wheeler segment, but these remain in an early growth stage. While Sedemac’s expertise in control electronics gives it a strong base, ECUs in ICE vehicles play a similar role to motor controllers and battery management systems in EVs, the timing challenge remains. If EV adoption accelerates faster than forecast, or if regulatory changes push ICE platforms out more quickly, Sedemac’s primary revenue streams may face pressure. In FY25, sale of products accounted for Rs 643.06 crore of the Rs 658.36 crore total revenue, underscoring the scale of dependence on ICE-linked business.

Mobility dominates revenues, creating concentration and transition risks

The mobility segment contributed 80 to 86 percent of Sedemac’s revenue across FY23, FY24, FY25 and the June 2025 quarter. This concentration helps scale but exposes the company to sectoral swings. Any slowdown in OEM production, emission norm changes or delays in customer programmes can directly impact revenue.

A heavyweight R&D engine with substantial intangibles

Sedemac distinguishes itself with a large R&D-led asset base. As of March 2025, the company held Rs 68.93 crore in intangible assets, Rs 49.31 crore in intangible assets under development and Rs 114.81 crore in property, plant and equipment.

The large pool of intangibles under development points to multiple ongoing projects yet to be commercialised. Each product moves through a long, multi-stage cycle, proof of concept, early commercial wins and broader adoption, which introduces engineering and commercial risks. A significant portion of Sedemac’s assets, therefore, is tied to future rather than current revenues.

A rare offer for sale in a deeptech listing, and what it signals

Sedemac’s IPO includes no fresh issue of shares. It is entirely an offer for sale by existing investors, unusual for a deeptech or manufacturing company where capex needs typically drive fundraises.  The company had earlier raised around $100 million from investors including A91 Partners, Xponentia and 360 ONE Asset, and the IPO now serves as a liquidity event for these long-term shareholders. The move signals that Sedemac is not seeking capital for expansion or debt repayment, that early investors are monetising part of their holdings, and that the balance sheet clean-up has already taken place internally. This puts the focus squarely on valuation and investor appetite rather than capital deployment plans.

Customer concentration with TVS Motor

A crucial detail in the DRHP is Sedemac’s heavy reliance on TVS Motor. TVS alone contributed 76.61 percent of revenue in the June 2025 quarter, 80.46 percent in FY25, 83.46 percent in FY24 and 79.05 percent in FY23. This makes Sedemac one of the most concentrated suppliers among upcoming IPO candidates. TVS adopted Sedemac’s sensorless ISG technology in 2018, and its platforms remain the largest users of these products.

None of Sedemac’s customers, including TVS, are bound by minimum purchase commitments. Any reduction in volumes or shift to competing technologies would be difficult to replace quickly, especially since ISG-based products form more than half of Sedemac’s revenue.

How the board’s compensation compares with new-age startups

In FY25, Managing Director Prof Shashikanth Suryanarayanan earned Rs 5.39 crore, Joint Managing Director Amit Dixit earned Rs 3 crore and Whole Time Director Manish Sharma earned Rs 2.65 crore. For FY26, the board has approved potential maximum remuneration of Rs 8.45 crore, Rs 6.3 crore and Rs 3.85 crore respectively, with future ceilings rising further.

These figures place Sedemac’s leadership in the lower to mid range of compensation among recently listed tech and consumer internet companies, where founder salaries typically fall between Rs 3 crore and Rs 20 crore.