Quality Power IPO Day 1: Brokerage Reviews, Allotment Date & More

The initial public offering of Quality Power Electrical Equipments opened for bidding on February 14 and will remain open for subscription till February 18. The price band has been fixed in the range of ₹401-425 apiece. Investors can apply for a minimum of 26 shares and in similar multiples.

The IPO of Sangli-based power equipment supplier is valued at ₹858.70 crore. The IPO is a combination of fresh issue and offer-for-sale (OFS) valued at ₹225 crore and ₹633.70 crore respectively. Proceeds from the issue will be utilised towards the acquisition of Mehru Electrical and Mechanical Engineers, funding capex needs, funding inorganic growth and general corporate purposes.

What did brokerages say?

1. Elara Capital

Rating - Subscribe for long-term

Growing importance of renewable energy and surge in HVDC demand has led to capacity crunch globally, which is thereby prompting Indian companies to step up. Elara Capital said that the company has a sizeable presence in reactors & transformers, while new capacity expansion will steer growth once it becomes operations, Elara Capital said.

It said, “The proposed Mehru acquisition has the potential for value unlocking via selling Mehru’s products abroad by utilizing Quality Power’s brand and distribution channel, as most Mehru’s sales are domestic. Post issue, it would be at 47 times Proforma FY24 P/E at a sizable discount to peers. We recommend Subscribe for the long term.”

2. SBI Securities

Rating: Subscribe for long-term

Though it's valued at FY24 P/E and EV/Ebitda multiple of 59.3 times and 80.8 times, the issue is expensive. The proforma FY24 P/E and EV/Ebitda multiples are 50.1 times and 59 times, respectively which appears to be expensive looking at the relatively smaller scale of business, said SBI Securities.

It said, “Although the company is doing well on financial metrics and generates healthy return ratios in the range of 34-36 per cent, we believe the listing gains can be muted due to relatively stretched valuations. Hence, we recommend investors only with a long term investment horizon to subscribe to the issue at the cut-off price.”

About the company

Incorporated in 2001, Quality Power Electrical Equipments is involved in the business of energy transition equipment and power technologies. Specialising in power products across generation, transmission, distribution, and automation sectors, the company facilitates high-voltage electrical equipment and solutions for grid connectivity.