Borderline, landed KILL. Re-check at first results.
Why:
- This is a lowest-bidder maker in a crowded trade, and the one thing that would set it apart is unexplained. It makes distribution and small power transformers, sold mostly by winning government electricity-board tenders on price, in a market with more than 300 makers (T2). Its profit margin doubled in two years, which would be the story if it held, but the filing never explains how: input metals (copper, aluminium, transformer oil) all rose over the year (T2), and not one listed peer widened its margin, so this is not an industry tailwind. The most likely cause is a shift to cheaper aluminium windings and larger units, which is a mix effect that can reverse, not a durable edge. The new solar inverter-duty line the offer partly funds sells into a segment held by entrenched names (Shilchar, Voltamp, Danish), where the barrier is a proven reference list the company does not yet have.
- Most of the growth is not the transformer business. Reported revenue rose 12% in FY2026, but transformer sales grew only 4.3%; roughly two-thirds of the growth was a brand-new copper-rod trading line that buys and sells at almost zero margin (T1). Strip the trading and the real engine grew in the single digits.
- The related-party web is large and priced by the family. Related-party dealings are about 14% of revenue, dominated by a promoter-owned tank maker (SHR Powers) whose entire turnover is smaller than what Raksan buys from it, so value could be leaking to a captive supplier with no visible arm's-length check (T1/T3). A promoter sits on the three-person audit committee that approves those dealings, and the company is selling a non-core plot of land to a promoter with no independent valuation shown.
What is genuinely good, and why this is a coin-flip: revenue doubled to ₹363 cr, the operating margin rose every year to about 13%, returns on capital are high (~46%), the distribution-transformer capacity was expanded from internal cash, the promoters keep 69% and sell little, debt is light, and the government distribution build-out (RDSS) is a real, funded demand tailwind. If the margin proves durable and the new line qualifies, this is a TRACK. On today's evidence the margin is unexplained and the growth is thin under the trading line.
Valuation at the band
| Floor ₹258 (T1) | Cap ₹273 (T1) | |
|---|---|---|
| Bid window | 10 to 15 September 2026 | |
| Market capitalisation | ₹539 cr | ₹570 cr |
| P/E (FY2026 earnings) | 16.0x | 17.0x |
| EV/EBITDA (FY2026, reported net debt) | ~11.9x | ~12.5x |
| Promoter holding after the offer | 69.1% | 69.1% |
About 16 times a year of earnings for a lowest-bidder transformer maker whose margin step-up the filing does not explain; the debt the offer repays is small, so it barely moves the enterprise multiple. The price does not change the verdict, which is a judgement on the business and the offer, not on whether ₹258 to ₹273 is right.
The story
Raksan makes electrical transformers, mainly distribution transformers up to 400 KVA and power transformers up to 20 MVA, at two rented sheds in Sonepat and sells them by winning state electricity-board tenders, with more than half of revenue from Uttar Pradesh. The two-year doubling of revenue and profit is the draw; the questions are whether the margin that drove the profit can last and how much of the growth is the transformer business rather than a new low-margin trading line.
What this business is
The company designs, makes and tests transformers to Indian standards and bids them into discom (distribution company) tenders, which are awarded to the lowest compliant bidder. It buys copper, aluminium and electrical (CRGO) steel, winds and assembles the units, and sells largely to government buyers in the north. Alongside the transformer business it began trading copper rod in FY2026, buying and reselling at close to no margin, which inflated the revenue line. The offer funds a new plant at Liwaspur that adds power-transformer capacity and a solar inverter-duty transformer line.
Easy or difficult business? Middling. Making a standard distribution transformer is a well-understood, crowded trade decided on price; the harder, higher-value end is large power and inverter-duty transformers, which is exactly where the company has no track record yet and faces established names.
Key numbers
| ₹ cr | FY2024 | FY2025 | FY2026 |
|---|---|---|---|
| Revenue | 161 | 324 | 363 |
| Revenue growth % | n/a | 101.0 | 12.0 |
| EBITDA margin % | 6.8 | 9.2 | 13.0 |
| PAT | 7.6 | 20.4 | 33.6 |
| PAT growth % | n/a | 168.4 | 64.7 |
Profit rose far faster than sales because the materials cost fell about 3.4 points of revenue across two years. The company does not explain it, input metals rose over the period, and no peer saw the same, so the most likely cause is a shift to cheaper conductor and larger units, a mix effect that can reverse. Two-thirds of the FY2026 revenue growth was the new near-zero-margin copper-rod trading line, so the transformer business itself grew only about 4%.
Scorecard
| Block | Rating | Why |
|---|---|---|
| Right to win | MARGINAL | A lowest-bidder maker among 300+ competitors; the margin edge is unexplained and may be a reversible mix shift; the new inverter-duty line faces an incumbent reference-list barrier it has not cleared. |
| Industry and TAM | PASS | The distribution-transformer market it serves is real and funded by the government RDSS build-out (~₹1.85 lakh cr of schemes); size is not the constraint. |
| Financial momentum | MARGINAL | Profit doubled, but on a materials-spread the filing never explains and against rising inputs; two-thirds of FY26 growth is a zero-margin traded line, so the real engine grew ~4%. |
| Risks, governance, RPTs | MARGINAL | Related-party dealings ~14% of revenue, dominated by a captive promoter tank-supplier; a promoter on the audit committee approving them; a non-core plot sold to a promoter with no independent valuation. |
| Promoter and cap table | PASS | Promoters keep 69% and sell little (one sells ~8% of his holding), nothing pledged, no ESOP; the only recent paper is a bonus. |
| Offer structure | PASS | 80% fresh money to a costed, monitored capex plan; watch the ~₹9.5 cr of the working-capital object that funds slower collection, and the tight Dec-2026 plant timeline. |
Watch out for
- The margin step-up is unexplained and possibly reversible. Inputs rose and no peer matched it; if it was a conductor-mix shift it can unwind, and a late-FY2026 input-cost spike lands after the reported year.
- A captive related-party supplier. The promoter-owned tank maker SHR Powers sells almost all its output to Raksan, so its margin is value that may be leaving the listed company; no arm's-length benchmark is shown, and a promoter approves the dealings from the audit committee.
- A promoter land purchase with no valuation. The company sells a non-core Jhajjar plot to a promoter (deed deferred to Dec 2027) with no independent valuation disclosed.
- The new capex is on a tight timeline. The Liwaspur plant is due to produce from December 2026 with the shed only about 17% paid and most machinery not yet ordered.
The offer
- Raising about ₹142-150 cr at the band, of which 80% is fresh money and 20% is one promoter selling part of his holding (T1).
- For a new plant at Liwaspur (power and inverter-duty transformers, ~₹62 cr), working capital (~₹35 cr) and debt repayment (~₹7 cr), with the rest general corporate purposes capped at 15%.
- Implied valuation is in the table above: about ₹539 to ₹570 cr, roughly 16 times a year of earnings whose margin we cannot yet explain.
- Promoters hold about 94% before the offer and 69% after; they sell only a small slice, which is a point in their favour.
Assessment from the RHP, with no outside verification beyond the price band and offer dates, which come from the exchange public records, and secondary market and trade sources used to test the filing's claims. Numbers carry source tiers: (T1) the filing's audited sections, (T2) exchange filings and established trade press, (T3) other secondary sources. Not a recommendation. The valuation section states what the announced band implies and is not a view on whether that price is right.