Vikran Engineering: Is Vikran Engineering’s IPO a risky bet with high client concentration and declining bids?

ET Intelligence Group: Vikran Engineering, an engineering, procurement, and construction (EPC) company, plans to raise ₹721 crore through fresh equity to meet working capital needs and upto ₹51 crore through an offer for sale. The promoter stake will fall to 56.2% after the IPO from 81.8%. The company operates at a higher margin compared with peers. Government business accounts for 80% of the revenue. The company has relatively higher receivable days. The business requires a substantial amount of working capital. The interest outgo is one-third of operating profit (PBIT). The bid success rate is on a decline while it shows high client concentration. Given these factors, investors may wait to see clarity in financials after the listing.

Business

Launched in 2011, Vikran Engineering’s projects include underground water distribution and surface water extraction, overhead tanks, and distribution networks. As of 30 June 2025, the company had 44 ongoing projects across 16 states, aggregating orders of ₹5,120.2 crore, of which the pending order book is ₹2,442.4 crore. Its success rate of bids substantially declined to 20% in FY25 from 42% in FY23.

Financials
Revenue from operations and net profit grew 32.2% and 34.8% annually to ₹915.8 crore and ₹77.8 crore between FY23 and FY25. The company generated around one-fourth of revenue from a single client during the period thereby showing high customer concentration. Operating margin before depreciation and amortisation (Ebitda margin) improved to 17.5% in FY25 from 15.2% in FY23, better than 2.3-13% for the peers. While Trade receivables days are on a higher side, they dropped to 190 days in FY25 from 221 days in FY23. The company expects this number to further decline to 170 days by FY27. The company has recorded negative net cash flows from operating activities in FY25 and FY24 of ₹129.1 crore and ₹66.5 crore, respectively.

Valuation

The company demands a price-to-earnings multiple of upto 32 compared with 31-40 for peers including Transrail Lightning, SPML Infra and Techno Electric & Engineering Company.