GK Energy IPO review

•    The company is India’s largest pure play provider for solar pump EPC and rooftop modules.
•    The company posted robust growth in its top and bottom lines since FY24 onwards.
•    As of August 15, 2025, it had orders on hand worth Rs. 1028+ cr.
•    Based on its recent financial data, the issue appears fully priced.
•    Investors can park funds for medium to long term. 

ABOUT COMPANY:
GK Energy Ltd. (GEL) is India’s largest pure play provider of engineering, procurement and commissioning (“EPC”) services for solar-powered agricultural water pump systems (which are also referred to as solar-powered pump systems) under Component B of the Central Government’s Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan scheme (the “PM-KUSUM Scheme”) as measured by the number of solar-powered pump systems installed under the PM-KUSUM Scheme in the period from January 1, 2022 to July 31, 2025 (source: CRISIL Report). It offers farmers an end-to-end single source solution for the survey, design, supply, assembly and installation, testing, commissioning and maintenance of solar-powered pump systems. It has been empaneled as a vendor under the Ministry of New and Renewable Energy for the PM-KUSUM Scheme in the states of Maharashtra, Haryana, Rajasthan, Uttar Pradesh and Madhya Pradesh. 

As at July 31, 2025, the five states of Maharashtra, Haryana, Rajasthan, Uttar Pradesh and Madhya Pradesh comprised 86% of the total number of solar-powered pump systems approved for subsidies under Component B of the PM-KUSUM Scheme (source: CRISIL Report). In addition, it is also empaneled under various state government schemes such as Maharashtra’s Magel Tyala Saur Krushi Pump Yojana, Madhya Pradesh’s Pradhan Mantri Krishak Mitra Surya Yojana and Chhattisgarh’s Saur Sujala Yojana.

The company currently primarily provide the EPC for solar-powered pump systems, which comprises direct-to-beneficiary sales and sales to others. Direct-to-beneficiary sales comprise (i) the EPC of GK Energy brand solar-powered pump systems to farmers who chose GEL as their vendor on portals of agencies appointed by state governments (known as state nodal agencies or state implementing agencies (“SNAs/SIAs”)) wherein the orders are placed with it by SNAs/SIAs under the PM-KUSUM Scheme and similar state government schemes, and (ii) the EPC of “GK Energy “ brand solar dual water pump systems (solar-powered pump systems that include water storage) to local government bodies. Sales to others comprise the EPC of solar-powered pump systems under orders placed by customers directly with the Company.

The PM-KUSUM Scheme reflects the Central Government’s commitment to provide energy and water security to farmers through the installation of solar-powered water pump systems for irrigation as an alternative to diesel-powered or electric grid-connected pump systems (source: CRISIL Report). The price of solar-powered pump systems is set through government tendering pursuant to a bidding process by empaneled vendors (with the lowest bid becoming the price all empaneled vendors must accept), with different prices depending on the size of the pump (source: CRISIL Report). Each state has its own tendering process, so the prices for the EPC of solar-powered pump systems may differ from state to state (source: CRISIL Report). As at July 31, 2025, 1,272,758 solar-powered pump systems had been approved under Component B of the PM-KUSUM Scheme, and as at that date empaneled providers had completed 848,330 of those orders (source: CRISIL Report). GEL completed 62,559, or 7.37%, of those 848,330 orders. Apart from the PM-KUSUM Scheme, as at July 31, 2025, it has installed 34,539 other solar-powered pump systems. The company also offers other EPC services, comprising (i) the erection and installation of water storage and distribution facilities under Jal Jeevan Mission, a Central Government scheme operated through urban local bodies, (ii) the supply and installation of various solar products for government agencies and (iii) rooftop solar solutions (together, “Other EPC Services”). In addition, GEL sells photovoltaic (“PV”) cells and solar modules manufactured by third parties and other miscellaneous products (“Trading Activities”).

As of August 15, 2025, it had an Order Book of Rs. 1028.96 cr. consisting of an SPPS Order Book of Rs. 1008.88 cr. and orders for rooftop solar systems of Rs. 20.08 cr. The company defines its “SPPS Order Book” as (i) the estimated value of the allocations for the EPC of solar-powered pump systems granted to GEL by SNAs/SIAs under the PM-KUSUM Scheme and similar state government schemes plus (ii) the work orders and confirmations received by it under all other EPC contracts for solar-powered pump systems, minus revenue already recognised from such allocations and other contracts as at the last day of the year/period.

Before the company entered into providing EPC services for solar-powered pump systems, it had been providing EPC services for rooftop solar-powered solutions, solar fencing, solar water heaters and solar-powered street lights. Its expertise in solar-powered energy can be seen in its selections in 2011 and 2012 to serve as consultants to projects funded by the United Nations Development Program and the Ministry of New and Renewable Energy to install solar water heaters and to develop performance measuring and testing standards for solar concentrator technology, respectively. It currently operates an asset-light business model. GEL sources solar panels, pumps and various other components of solar-powered pump systems under the “GK Energy” brand from different specialized vendors. However, it is planning to backward integrate business by manufacturing own solar panels, which accounted for the largest component of the direct costs of its EPC of direct-to-beneficiary solar-powered pump systems in Fiscals 2025, 2024 and 2023.

As of August 30, 2025, it rented, leased and/or licensed 12 warehouses located in three states. In addition, where there is less demand for solar-powered pump systems, it has flexible arrangements with contractors to temporarily utilize their facilities for storage. Its decentralized infrastructure and access to the storage facilities of local contractors reduces the time needed to install solar-powered pump systems and provide after-sales services, thus increasing operational efficiency.

The company had 90 employees as of March 31, 2025. It conducts EPC projects by engaging third-party installation and commissioning service providers. As of March 31, 2025, third-party installation and commissioning service providers comprised 709 workmen, which enables it to operate across broad geographic areas in five states and soon six other states. GEL generally hire and train workforce locally, which contributes to the local rural economies with jobs, better earnings and skill enhancement for local residents, while also contributing to its operational efficiency. GEL’s decentralized warehouses also contribute to operational efficiency. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route secondary IPO of equity shares issue of 30343791 equity shares worth Rs. 464.26 cr. (at the upper cap). The IPO comprises of fresh equity shares issue worth Rs. 400 cr. (approx. 26143791 shares at the upper cap), and an Offer for Sale (OFS) of 4200000 equity shares (worth Rs. 64.26 cr. at the upper cap). The company has announced a price band of Rs. 145– Rs. 153 per equity shares of Rs. 2 each. The issue opens for subscription on September 19, 2025, and will close on September 23, 2025. The minimum application to be made is for 98 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 14.96% of the post-IPO paid-up equity capital. From the net proceeds of fresh equity shares issue, the company will utilize Rs. 322.46 cr. for working capital, and the rest for general corporate purposes. The company did a pre-IPO placement worth Rs. 100 cr. at a price of Rs. 153 (6535947 shares) and used it as a working capital.

The joint Book Running Lead Managers (BRLMs) to this issue are IIFL Capital Services Ltd., and HDFC Bank Ltd., while KFin Technologies Ltd., is the registrar to the issue. HDFC Bank Ltd. is also a syndicate member.

Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 19 – Rs. 175 per share (based on Re. 2 FV), between September 2022, and August 2025. It has also issued bonus shares in the ratio of 25 for 1 in December 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.03, and Rs. 0.15 per share. 

Post-IPO, its current paid-up equity capital of Rs. 35.33 cr. will stand enhanced to Rs. 40.56 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 3103.10 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit, of Rs. 285.45 cr. / Rs. 10.08 cr. (FY23), Rs. 412.31 cr. / Rs. 36.09 cr. (FY24), and Rs. 1099.18 cr. / Rs. 133.21 cr. (FY25). Incentive under PM KUSUM not only lifted the demand for solar pumps, but also boosted the prospects for farmers income and thus it has turned a win-win for all. 

According to the management, government’s support and incentive scheme under PM KUSUM augurs well for the segment and the company is reaping the benefits. It has also emerged as a most preferred solar pump / EPC entity. Demand has not only boosted the top line, but economy of scale has also pushed its earnings and the trends are likely to continue considering rising demand for solar pumps.

For the last three fiscals, the company has posted an average EPS of Rs. 4.75 and an average RoNW of 61.81%. The issue is priced at a P/BV of 12.39 based on its NAV of Rs. 12.35 as of March 31, 2025, and at a P/BV of 4.36 based on its post-IPO NAV of Rs. 35.09 per share (at the upper cap).

If we attribute FY25 earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 23.29. Based on FY24 earnings, the P/E stands at 85.96. Thus, the issue appears fully priced. 

The company has shown PAT margins of 3.53% (FY23), 8.75% (FY24), 12.12% (FY25), and RoCE margins of 29.36%, 50.10%, 55.65%, respectively for the referred periods.

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It has already adopted a dividend policy in December 2024, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Shakti Pump and Oswal Pump as their listed peers. They are currently trading at a P/E of 26.3 and 32.2 (as of September 17, 2025). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER’S TRACK RECORD:
The two BRLMs associated with the offer have handled 46 pubic issues in the past three fiscals, out of which 10 issues closed below the offer price on the listing date.