Can Karamtara Engineering IPO deliver long-term growth for high-risk investors?

ET Intelligence Group: Karamtara Engineering, a solar and transmission equipment manufacturer, plans to raise ₹675 crore through a fresh equity issue to repay debt and ₹200 crore through an offer for sale. The promoter stake will fall to 82% after the IPO from 92%. The company has reported a healthy growth in revenue, operating margin and net profit over the past three years. However, it faces regulatory risks due to significant exposure to the renewable energy sector. Rising steel and metal prices may weigh on margins. Given these factors, the issue appears to be suitable for long-term investors with a higher risk tolerance.

Business

Incorporated in 1996, the company manufactures solar mounting structures, solar tracker components, transmission line towers, wind energy structures and other steel products used in renewable energy and power transmission projects. Solar products remain the core business, accounting for 79% of revenue in FY26, although the company has been diversifying into transmission and wind products. It is the largest integrated manufacturer in terms of installed capacity for solar mounting structures and tracker components. It operates 13 manufacturing facilities, including 12 in India and one in Italy, with an aggregate installed capacity of 889,200 million tonnes per annum. The company also plans to enter battery energy storage systems and prefabricated engineered building structures. With exports contributing nearly 41% to FY26 revenue, the company is exposed to currency fluctuations, trade barriers and tariffs and geopolitical tensions.
Read more: NSE slashes IPO size to Rs 23,500 crore in revised Sebi filing

Financials

Revenue from operations increased 33.3% annually to ₹4,312 crore in FY26 from ₹2,425 crore in FY24. Operating margin before depreciation and amortisation (EBITDA margin) improved to 11.6% from 10.8% over the same period but remains below the range of 18%-26% for some of the renewable energy companies. Net profit rose to ₹228.7 crore in FY26 from ₹102.6 crore in FY24. Return on equity improved marginally to 20.8% in FY26 versus 20.5% in FY24 although it remains at the lower end of range of 21% to 42% for other companies. The debt increased to ₹881.3 crore in FY26 from ₹463.1 crore in FY24, primarily due to capacity expansion. However, the debt-equity ratio improved to 0.8 from 0.9 during the period.

Valuation

The company seeks a price-earnings (P/E) multiple of 35.7 on post-IPO basis. While it does not have an exact peer group given its varied product portfolio, some of the listed companies in the renewable energy segment such as Premier Energies, Waaree Energies and Inox Wind trade at P/Es of 11, 19 and 30 respectively.

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