Oswal Pumps IPO review (May apply)

•    The company is one of the leading players in solar pumps segment.
•    It marked growth in its top and bottom lines. Boost in bottom lines from FY24 onwards is attributed to its shift for solar pump segment.
•    The company will be debt free post IPO and planned expansion will boost its income going forward.
•    Based on its recent financial data, the issue appears aggressively priced.
•    Well-informed investors may park funds for medium to long term.

ABOUT COMPANY:
Oswal Pumps Ltd. (OPL) is the fastest growing vertically integrated solar pump manufacturers in India in terms of revenue growth during the last three fiscals, with its revenues growing at a CAGR of 45.07% between Fiscal 2022 and Fiscal 2024. (Source: 1Lattice Report). It manufactures solar-powered and grid-connected submersible and monoblock pumps, electric motors comprising induction and submersible motors as well as solar modules, which it sells under the ‘Oswal’ brand. The company has over 22 years of experience in pumps encompassing engineering, product design, manufacturing and testing. It caters to the diverse requirements of end-users in the agricultural sector for irrigating fields; the residential sector for maintaining gardens and fountains, extracting water, supplying water to overhead tanks and cleaning households and small establishments; commercial premises such as shopping malls, offices and hotels; industries which use its pumps in boilers and water treatment, water transportation and sewage applications and use its electric motors in machinery applications and cooling tower systems.

The Company commenced its operations in 2003 with the manufacturing of low-speed monoblock pumps. Over the years, it expanded operations to manufacture grid-connected high-speed monoblock pumps, grid-connected submersible pumps and electric motors. In March 2019, the Government of India launched the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan Scheme (“PM Kusum Scheme”) with a total Rs. 344 billion (USD 4.1 billion) central financial support with the objective of installing 1.40 million standalone solar agriculture pumps in off-grid areas to provide energy security for farmers, reduce the consumption of diesel, promote the use of renewable energy in the agricultural sector and reduce environmental pollution. (Source: 1Lattice Report). The PM Kusum Scheme also focuses on the solarization of 3.50 million existing grid-connected agricultural pumps and provides subsidies to individual farmers who have grid-connected pumps to retrofit their pumps with solar panels. (Source: 1Lattice Report). Recognizing the benefits provided by the PM Kusum Scheme, OPL decided to leverage its extensive experience in pump manufacturing and expanded operations to manufacture solar powered agricultural pumps in 2019. The company started supplying these pumps to players participating and providing Turnkey Solar Pumping Systems under the PM Kusum Scheme, including Tata Power Solar Systems Limited. It also supplied pumps to certain vendors empaneled under the Mukhyamantri Saur Krushi Pump Yojana launched by the Government of Maharashtra in 2019. Subsequently, in 2021, it started offering turnkey solar pumping systems comprising solar powered agricultural pumps, solar modules, mounting structures, pump controllers and their installations (“Turnkey Solar Pumping Systems”), either directly or through third party bidders under the PM Kusum Scheme.

As of December 31, 2024 it has executed orders for 38,132 Turnkey Solar pumping Systems directly under the PM Kusum Scheme for several states such as Haryana, Rajasthan, Uttar Pradesh and Maharashtra. Within four years of supplying solar powered agricultural pumps, in Fiscal 2024 and 2023, we emerged as one of the largest suppliers of solar powered agricultural pumps under the PM Kusum Scheme, (i) providing Turnkey Solar Pumping Systems directly under the PM Kusum Scheme to farmers, (ii) providing Turnkey Solar Pumping Systems to players participating in the PM Kusum Scheme, and (iii) supplying only solar pumping system (including solar pump sets, solar modules, structures and balance of systems (“BOS”) kits and excluding installation services) to players participating in the PM Kusum Scheme. (Source: 1Lattice Report)

OPL is one of the few fully integrated Turnkey Solar Pumping Systems providers in India with the capability to manufacture solar powered agricultural pumps, solar modules and pump controllers and provide installation services for such systems. (Source: 1Lattice Report) To enhance its capabilities as Turnkey Solar Pumping Systems provider, the company commenced manufacturing solar modules for Turnkey Solar Pumping Systems on January 8, 2024 through wholly-owned subsidiary, Oswal Solar Structure Private Limited. It has end-to-end pump manufacturing capabilities and have undertaken several backward integration initiatives over the years, enabling it to produce several components of a pump in-house and providing with competitive advantages. OPL also focuses on recycling scraps to produce certain components of pumps. It also harnesses the capabilities of electronics to optimize the end-use efficiency of pumps. 

It has an extensive network of distributors in India, which has grown from 473 distributors as of March 31, 2022 to 925 distributors as of December 31, 2024. As of December 31, 2024, it had a team of 171 employees who were responsible for addressing customer queries and resolving operational issues related to its products. The company also provides toll-free support services to customers in English and Hindi. In March 2024, the company introduced the ‘Oswal Shoppe’ concept to bolster its market presence. 

As of December 31, 2024, we had an annual installed capacity of 1,160.07 MT for stainless steel pumps, 2,366.04 MT for cast iron pumps, 1,314.72 MT for stainless steel motors and 561.60 MT for cast iron motors. Over the periods, its institutional customer share in revenue reduced from 75.61% in Fiscal 2023 to 7.15% for 9M of FY25, but its government entities contribution peaked up from NIL in Fiscal 2023 to 78.51% for 9M of FY25 indicating the likely scenario going forward. With State and Central Government’s push and encouraged promotions, this segment is poised for a fast forward mode. According to the management, the company will be debt free post IPO and will also invest in expansion plans that will boost its top line with commensurate rise in bottom line.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden/combo book building route IPO of fresh equity shares issue worth Rs. 890.00 cr. (approx. 14495114 shares at the upper cap), and an Offer for Sale (OFS) of 8100000 equity shares (worth Rs. 497.34 cr. at the upper cap). The company has announced a price band of Rs. 584 – Rs. 614 per equity shares of Re. 1 each. The overall size of the issue will be approx. 22595114 shares worth Rs. 1387.34 cr. The issue opens for subscription on June 13, 2025, and will close on June 17, 2025. The minimum application to be made is for 24 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 19.82% of the post-IPO paid-up equity capital. From the net proceeds of the fresh equity issue, the company will utilize Rs. 89.86 cr. for funding certain capex, Rs. 272.76 cr. for investment in wholly owned subsidiary Oswal Solar, Rs. 280.00 cr. for repayment/prepayment of certain borrowings, Rs. 31.00 cr. for investment in Oswal Solar for repayment/prepayment of its certain debts, and the rest for general corporate purposes. 

The joint Book Running Lead Managers (BRLMs) to this issue are IIFL Capital Services Ltd., Axis Capital Ltd., CLSA India Pvt. Ltd., JM Financial Ltd., and Nuvama Wealth Management Ltd., while MUFG Intime India Pvt. Ltd., is the registrar to the issue. JM Financial Services Ltd., Nuvama Wealth Management Ltd. are the syndicate members.

Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 5 – Rs. 40 per share (based on Re. 1 FV), between December 2003, and February 2012. It has also issued bonus shares in the ratio of 7 for 10 in August 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, Rs. 1.08, and Rs. 4.10 per share. 

Post-IPO, its current paid-up equity capital of Rs. 9.95 cr. will stand enhanced to Rs. 11.40 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 6998.21 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 361.11 cr. / Rs. 16.93 cr. (FY22), Rs. 387.47 cr. / Rs. 34.20 cr. (FY23), and Rs. 761.23 cr. / Rs. 97.67 cr. (FY24). For 9M of FY25 ended on December 31, 2024, it earned a net profit of Rs. 215.80 cr. on a total income of Rs. 1067.34 cr. 

For the last three fiscals, the company has posted an average EPS of Rs. 6.34 and an average RoNW of 81.15%. The issue is priced at a P/BV of 16.13 based on its NAV of Rs. 38.06 as of December 31, 2024, and at a P/BV of 5.52 based on its post-IPO NAV of Rs. 111.32 per share (at the upper cap). 

If we attribute FY25 annualized super earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 24.33. Based on FY24 earnings, the P/E stands at 71.65. Thus, the issue is aggressively priced. 

The company reported PAT margins of 4.69% (FY22), 8.83% (FY23), 12.83% (FY24), 20.30% (9M-FY25), and RoCE margins of 27.01%, 45.47%, 81.85%, 65.96% for the referred periods, respectively. 

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 September 2024 and amended in May 2025, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Kirloskar Bros., Shakti Pumps, WPIL Ltd., KSB Ltd., and Roto Pumps, as their listed peers. They are trading at a P/E of 34.8, 28.7, 32.4, 58.8, and 52.9 (as of June 10, 2025). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER’S TRACK RECORD:
The five BRLMs associated with the offer have handled 90 pubic issues in the past three fiscals, out of which 21 issues closed below the offer price on the listing date.