Kanohar Electricals Limited (Subscribe)

Highlights

Kanohar Electricals Limited (KEL), incorporated in 1972, is one of the leading domestic transformer manufacturers, catering to power transmission, railways, renewable energy and power distribution. Alongside, its backward-integrated manufacturing and in-house testing capabilities enable a broad product portfolio serving India’s growing energy infrastructure.

KEL operates across two complementary segments – (i) Transformer Manufacturing and (ii) EPC. Under the EPC segment, they undertakes turnkey execution of substations and transmission lines, covering design, engineering, procurement, erection, testing and commissioning. This integrated model enables end-to-end power transmission and distribution solutions, supporting customer relationships and revenue visibility.

KEL operates two manufacturing facilities at Meerut with an aggregate transformer manufacturing capacity of 19,200 MVA, capable of producing transformers up to 500 MVA, 400 kV. With five regional offices across major metros and EPC projects executed across 13 states, KEL has a pan-India presence serving PSUs, state utilities and private-sector customers.

Out of the total proceeds of Rs. 10,557 mn, Rs. 642 mn would go towards funding the capital expenditure requirements, Rs. 1,550 mn would go towards funding the incremental working capital requirements and remaining Rs. 808 mn would go towards general corporate purposes. Additionally, Rs. 7,557 mn is going towards promoter selling shareholders.

Key Highlights

• The Indian transformer market grew at a 5.0 pct CAGR during CY19-25 to USD 4.95 bn and is projected to reach USD 6.85 bn by CY30 at a 6.7 pct CAGR. Within these market, Power transformers accounted for the largest share at 50 pct in CY25 and are projected to reach USD 3.67 bn by CY30, followed by distribution transformers at 40 pct, expected to reach USD 2.53 bn.
• KEL manufactures five types of transformers with customised technical specifications to meet the energy needs of its end-user industries. They also have capabilities to manufacture Gas Insulated Switchgear (GIS), a critical high-voltage power network component, supported by a technical collaboration for advanced GIS solutions.

• KEL has a backward integrated setup that supports in-house production of critical transformers components such as tanks and radiators. This reduces dependency on external vendors, ensures stringent quality control, help cost optimization, and also enable faster lead times for product delivery compared to competitors.
• KEL is expanding its Gangol facility to increase capacity for large power transformers (500 MVA, 400 kV) while automating material handling to improve efficiency and reduce bottlenecks. The Company is also strengthening backward integration through automated in-house production of radiators and insulation components.
• KEL’s has successfully conducted transformer’s short circuit testing at reputed government laboratories, validating its ability to withstand thermal and mechanical stresses, strengthening its eligibility for large, high-value orders, as reflected in higher sales of 500 MVA, 400 kV power transformers in FY26 and a major order from India’s largest power transmission company.
• KEL’s current order book stood at Rs. 18.18 bn, providing strong revenue visibility of nearly three years, with Transformer Manufacturing business dominates the order book at 89.2 pct, led by power transformers at 68.0 pct of the total order book, while EPC contributed 10.8 pct. By client types, government orders form a bulk at 93.6 pct.
• KEL’s key growth strategies include (i) To capitalize on industry tailwinds by strengthening manufacturing capabilities and enhancing operational efficiencies at manufacturing facilities, (ii) strengthen backward integration capabilities, (iii) strategic focus on new product development and technology advancements, (iv) commit robust execution standards for operational excellence, and (v) ensure supply chain security through adequate working capital liquidity.
• The sales of the company have grown by 53.72 pct CAGR over FY24-26 and EBITDA/profit has grown 140.85 pct CAGR/169.94 pct CAGR over same year. In FY26 the company reported sales of Rs. 6,538 mn rose 45.10 pct YoY. EBITDA of the company increased 93.15 pct YoY to Rs. 1,804 mn. In FY26 the company posted profit of Rs. 1,297 mn, up 99.23 pct.

Key Risk

• KEL’s revenue is heavily dependent on government-controlled entities, and any non-compliance or contractual breach could lead to disqualification, suspension, or blacklisting from future government tenders.
• KEL’s transformer manufacturing business is heavily concentrated at its Gangol facility, making it vulnerable to disruptions, any plant shutdown or equipment breakdown at this single location could significantly affect operations and results.

Financial Performance

Source: – RHP.

Peer Comparison based on FY26 Financials.

Source: – RHP.

Valuation

Kanohar Electricals Limited (KEL) provides end-to-end service offerings across the product lifecycle, including site installation support, supervision of testing and commissioning of transformers. Their portfolio includes Power Transformers up to 500MVA 400kV, Shunt Reactors up to 125MVAR 400kV, Scott-connected Transformers up to 100 MVA 220/2×55 kV, Traction Transformers up to 30.24MVA 220kV, Gas Insulated Switchgear, and AIS/GIS Substations and Transmission Lines up to 400kV class on an EPC basis. At the upper end of the price band of Rs. 632, the issue is priced at an PE of 39x its FY26 post issue capital. The issue appears to be fully priced. However, only high-risk investors can subscribe this issue from a longer-term perspective.

Disclaimer: The views shared in blogs are based on personal opinions and do not reflect the company’s views. Investment involves risk, and it is advisable to consult a financial advisor before making any investment through the app. The decision to invest is solely that of the investor, and the company or its communication cannot be held responsible for it.