Quadrant Future Tek
IPO Size: Rs. 290 cr, Entirely Fresh Issue
- For working capital Rs. 150 cr, capex for electronic interlocking system Rs.24 cr, debt repayment Rs. 24 cr, of Rs. 98 cr gross debt
Price band: Rs. 275-290 per share
M cap: Rs. 1,160 cr, implying 25% dilution
IPO Date: Tue 7th Jan to Thu 9th Jan 2025, Listing Tue 14th Jan 2025
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
Speciality Cable and Railway Systems Maker
Quadrant Future Tek is a Punjab based manufacturer of (i) speciality cable for railway (rolling stock) and naval (defence) use and (ii) train control and signalling systems for Indian Railways. It has developed Train Collision Avoidance System (under KAVACH project) and received technical clearance by Research Design and Standards Organization (RDSO, Indian Railways) for field trial and implementation of order worth Rs. 17 cr for 5 stations and 10 locomotives.
At an Inflection Point
Also, company has bagged a Rs. 979 cr order for 1,200 locomatives, which is guided to be completed in the next 12 months. This keeps outlook for H1FY26E extremely positive. In addition, there is an annual maintenance contract (AMC) at 3% pa of capital cost, for 11 years, which provides future revenue visibility. Besides, company has signed MoU with Railtel to explore KAVACH opportunities in India and overseas.
KAVACH investment impact H1FY25 Financials
FY24 revenue stood at Rs. 152 cr, entirely from cables division, with 24% EBITDA margin and 10% PAT margin. On FY24 PAT of Rs. 15 cr, EPS stood at Rs. 4.9, with 33% RoE.
In H1FY25, revenue was at Rs. 65 cr, of which, Rs. 62 cr came from cables, as KAVACH revenue is yet to start, but expenses (employee and R&D) towards which adversely impacted margins. EBITDA contracted to 1% in H1FY25, with net loss at Rs. 12 cr.
On net worth of Rs.34 cr, company has gross debt of Rs. 98 cr, implying debt equity ratio of 2.8:1, which will moderate to 0.2:1, post IPO. Working capital of nearly 4 months is in-line and share of business from group companies has haved to 16% of reveneu in the past 2 years.
Valued for Future Opportunity
Historic FY24 PAT of Rs. 15 cr cannot justify the Mcap of Rs. 1,160 cr and enterprise value of Rs. 1,233 cr. Company must be evaluated in light of Rs. 979 cr order to be executed in the coming year and vast opportunities in future, under MoU with Railtel. Besides, it is diversifying cable manufacturing (only 50% capacity utilised at present) to renewable energy (solar cells and electric vehicles), again holding tremendous potential. Thus, company’s future looks promising, despite being a nano cap stock.
7th Jan 2025 at 12:46 pm
7th Jan 2025 at 08:30 am