Oswal Pumps, a prominent manufacturer of solar-powered and grid-connected pumps, electric motors, and solar modules, has launched an Initial Public Offering (IPO) valued at ₹1,387 crore. The IPO, which opened on June 13 and is set to close on June 17, aims to raise funds for crucial purposes, including the repayment of debt and expansion of capital expenditure. The fresh issue of shares accounts for ₹890 crore, while an additional ₹497 crore will be raised through an offer for sale by promoter Vivek Gupta, leading to a decrease in the promoter group's stake from 100% to 80% post-IPO.

The company has established a strong financial track record over the past three years. Revenue grew by an impressive 45% annually, from ₹360.4 crore in FY22 to ₹758.6 crore in FY24, with net profit surging from ₹16.9 crore to ₹97.7 crore during the same period. For the nine months ended December 2024, Oswal Pumps reported robust revenue of ₹1,065.7 crore and a net profit of ₹216.7 crore. Operating margin (EBITDA margin) significantly improved to 30.1% in this nine-month period from 10.7% in FY22, while the PAT margin reached 20.3%. Despite this growth, net debt increased to ₹531.5 crore from ₹83 crore, necessitating the planned repayment of ₹280 crore from IPO proceeds.

Oswal Pumps operates two manufacturing facilities in Karnal, Haryana, featuring vertically integrated capabilities. Its distribution network has expanded substantially, growing from 473 distributors in March 2022 to 925 as of December 2024. The company has also launched its own retail outlets, 'Oswal Shopee,' with 248 stores by June 2025. While the company has exported products to 22 countries, including Australia and Dubai, the proportion of exports in revenue decreased to 3.7% in the nine months to December 2024 from 10.9% in FY22.

A significant aspect of Oswal Pumps' business model is its strong reliance on government contracts under the PM-Kusum Scheme. More than three-fourths of its revenue, and specifically 87.3% in the nine months to December 2024, is derived directly or indirectly from this scheme. The company has executed 38,132 solar pumping system orders directly under this scheme and accounted for approximately 38% of India's installed solar pumps as of December 2024. This concentration, however, poses a key risk, as does the significant increase in trade receivables days from 40 to 123 days and working capital cycle days from 71 to 142 days, leading to higher working capital requirements.

The IPO's price band is fixed at ₹584–614 per share, with investors able to bid for a minimum of 24 shares. Oswal Pumps successfully secured ₹416 crore from anchor investors on June 12 by allocating 67.78 lakh shares at ₹614 apiece to marquee institutions like Societe Generale and Smallcap World Fund. The grey market premium (GMP) stood at ₹68, indicating an estimated listing gain of about 11% at a potential listing price of ₹682. From a valuation perspective, considering the post-IPO equity and annualized net profit, the company demands a price-earnings (P/E) multiple of up to 24, which appears reasonable compared to peers like Roto Pumps, Shakti Pumps India, WPIL, and KSB, whose P/Es range from 28 to 60. Oswal Pumps also boasts superior return ratios, with RoE at 72.6% and RoCE at 56%.

Despite the inherent risks associated with its dependence on government schemes and a high receivables cycle, SBI Securities has recommended subscribing to the IPO for a long-term horizon. Their recommendation is based on the company's strong revenue and profit growth, robust order book of ₹1,100 crore, dominant market share under the PM-Kusum scheme, and efficient cost structures.