Can Kanohar Electricals IPO deliver long-term growth for high-risk investors?

ET Intelligence Group: Kanohar Electricals, a transformer manufacturer, plans to raise ₹300 crore through a fresh issue to expand capacity and ₹755.7 crore through offer for sale. The promoter stake will fall to 74.9% after the IPO, including the pre-IPO anchor share sales to institutional investors from 99.7%. The company is expected to benefit from rising power demand and the government's push to expand electricity transmission. However, it faces significant customer and supplier concentration risks. Government entities accounted for 85% of revenue in FY26. Given these factors, investors may prefer to wait and watch the company's financial performance after listing.

Business

Incorporated in 1972, the company is a power equipment manufacturer focused primarily on transformers, with an EPC (engineering, procurement and construction) business providing solutions for substations and transmission lines. It caters to sectors such as power transmission, railways, renewable energy and power distribution. Transformer manufacturing contributed 83.4% to revenue in FY26, while EPC services accounted for the balance. It has two manufacturing facilities in Meerut, Uttar Pradesh with aggregate transformer manufacturing capacity of 19,200 MVA (Mega Volt-Amperes) as of March 2026, up from 15,000 MVA in FY24. Although capacity utilisation imporved to 46% in FY26 from 16.5% in FY24, it still remained low. Its order book increased to ₹1,818 crore as of March 2026 from ₹596 crore in FY24. The top five customers contributed 74% to revenue. On the supply side, its top three suppliers accounted for around 57% of raw material purchases.


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Financials

Revenue grew 54% annually to ₹653.8 crore in FY26 from ₹276.7 crore in FY24. Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) increased to ₹180.4 crore from ₹31.1 crore, while the EBITDA margin improved to 27.6% in FY26 from 11.2% in FY24, compared with peer range of 12%-27%. Net profit rose to ₹129.7 crore in FY26 from ₹17.8 crore in FY24. Return on equity increased to 42% in FY26 from 10.5% in FY24 compared with peer range of 19%-61%.

Valuation

The company seeks a price-earnings (P/E) multiple of 38.6 on post-IPO basis compared with a P/E of 33 for Transformers and Rectifiers, 81 for GE Vernova T&D India and 139 for Schneider Electric Infrastructure.