Chamunda Electricals Ltd. IPO: A Bold Leap into India's Renewable Energy Boom

Chamunda Electricals Ltd. Gears Up for IPO, Strengthens Position in Renewable Energy

In a strategic move to harness India's growing demand for electrical infrastructure and renewable energy solutions, Chamunda Electricals Ltd. (CEL) is preparing for its initial public offering (IPO) on the NSE SME Emerge platform. The Gujarat-based company, renowned for its expertise in substation operations and high-voltage testing, aims to raise INR 14.60 crores through a book-building issue scheduled to open on February 4, 2025.

IPO Details & Valuation Insights

CEL is offering 2,919,000 equity shares to the public, priced within a range of INR 47-50 per share, translating to 26.53% of its post-issue paid-up capital. The IPO requires a minimum application size of 3,000 shares. While CEL has demonstrated impressive financial growth, its valuation remains a point of discussion. Based on projected FY25 earnings, the IPO is priced at a P/E ratio of 14.66, while its FY24 earnings imply a multiple of 22.62, indicating a relatively premium valuation.

Impressive Growth & Turnaround Performance

CEL’s financial performance has been remarkable. The company's revenues nearly doubled from INR 11.32 crores in FY22 to INR 20.07 crores in FY24, with a dramatic turnaround in profitability—from a loss of INR 0.51 crores in FY22 to a profit of INR 2.44 crores in FY24. The momentum has continued into FY25, with the first nine months already delivering revenues of INR 18.43 crores and profits of INR 2.82 crores.

Strategic Utilization of IPO Proceeds

CEL plans to allocate the IPO proceeds strategically, with key investments in:

• Working capital (INR 5.50 crores) to support its growing operations.

• Debt repayment (INR 2.85 crores), strengthening its financial position.

• New testing equipment (INR 1.21 crores) to enhance service capabilities.

Robust Order Book & Market Presence

Backed by a solid order book of INR 64.37 crores, spanning 134 substation contracts, CEL has established itself as a key player in the electrical infrastructure segment. This strong pipeline of projects highlights its growth potential and revenue visibility in the coming years.

A Strategic Push into Renewable Energy

What truly sets CEL apart is its entry into the renewable energy sector. The company owns and operates a 1.5 MW solar power plant in Gujarat’s Banaskantha district, secured under a 25-year power purchase agreement with Uttar Gujarat Vij Company Limited. This diversification into clean energy aligns with India's renewable energy push and government initiatives supporting sustainability.

Investor Considerations: Growth Potential vs. Valuation Risks

While CEL presents a compelling investment opportunity, prospective investors should carefully evaluate its sustainability of earnings and current valuation metrics. The company has posted a sharp profit increase only since FY24, raising questions about the consistency of this growth trajectory. Additionally, the IPO is priced on the higher side, which could affect short-term gains.

Final Verdict: A Long-Term Growth Story?

For investors seeking exposure to India’s expanding electrical infrastructure and renewable energy sectors, CEL’s IPO offers an attractive entry point into a promising yet competitive industry. However, given its valuation and recent profit surge, a medium to long-term investment perspective may be more suitable. Investors should weigh their risk appetite before making a decision.