Will Sedemac’s IPO deliver long term growth for high-risk investors?

ET Intelligence Group: Sedemac Mechatronics, an auto components company, plans to raise Rs 1,087.5 crore through an offer for sale. The promoter group's stake will fall a tad to 26.2% after the IPO from 26.4%. The company designs and manufactures control-intensive electronic control units (ECU) for leading original equipment manufacturers (OEMs). Its revenue grew in double-digit while net profit more than doubled between FY23 and FY25. However, nearly 75% of the revenue comes from TVS Motor Company, reflecting customer concentration. Given these factors, investors with high-risk appetites may consider the IPO.

Business
Incorporated in 2007, Sedemac is a Pune-based company which designs and manufactures powertrain controllers, motor control products, and integrated starter-generator (ISG) solutions for automotive and industrial applications. The company provides patented sensor-less motor control technology, enabling precise performance without external sensors for both engine-powered and electric bicycles and three-wheelers. It has two manufacturing facilities in Pune with 94% and 81% capacity utilisation. It has two upcoming facilities, yet to be operational.

Financials
Between FY23 and FY25, revenue grew by 24.8% annually to '658.4 crore and net profit jumped 134.3% to '47 crore. Operating profit before interest, tax, depreciation and amortisation (Ebitda) grew 51.8% to '125.1 crore while Ebitda margin expanded to 19% from 12.8% during the period. Around 91% revenue comes from the top three customers. Return on equity (ROE) grew to 22% in FY25 from 7.8% in FY23. For the nine months ended December 2025, revenue and net profit were Rs 770.7 crore and Rs 71.5 crore, respectively. Though research & Development (R&D) expenses increased to Rs 53.8 crore during the nine months ended December 2025 from Rs 43.5 crore in FY23, R&D spend as a percentage of revenue declined to 7% from 10.3%.


Valuation
Considering the post-IPO equity and annualised profit for FY26, the price-earnings (P/E) multiple is 62.7. While it may not have a direct peer in the strict sense, some of the auto ancillary companies, including ZF Commercial Vehicle Control Systems India and Sona BLW Precision Forgings trade at forward P/Es of 56 and 54 respectively.