Acme India: Strong Order Book and Profit Recovery

1. IPO Overview

Acme India Industries is raising about Rs 122 crore at Rs 186-196 a share, mostly through new shares to repay debt and fund working capital. The promoter, Suraj Pandey, is selling a smaller slice worth about Rs 16 crore, and overall promoter stake will fall from 88.19% to 64.46% after the issue.

The two things to notice are the sharp shift in what the company sells and how slowly cash comes back. Turnkey furnishing of new coaches has collapsed as supply and toilet work has surged, while almost a full year of sales was still uncollected at March-end. It will list on the BSE SME platform, where trading is usually thinner than on the main board.

2. What the company does

Fits out new coaches, rebuilds old ones and modernises toilets

Acme India Industries designs, builds and fixes the inside of Indian passenger-train coaches. Think of everything a passenger sees or touches — floors, side walls, ceilings, seats and berths, doors between compartments, toilets, wash basins, mirrors, windows, lights and wiring — plus coatings and breakers that keep them safe.

It takes an empty coach shell at a coach factory and hands back a finished interior. It strips old coaches that have run for years and rebuilds them for more service. It upgrades toilets for comfort and hygiene. And it makes many of the parts that go into those jobs at its factory in Sonipat, Haryana, which has laboratory and testing equipment.

Two coach generations matter here. ICF is the older conventional design. LHB, or Linke Hofmann Busch, is the newer design now standard for most express trains. Acme works on both, plus self-propelled sets such as Vande Bharat that do not need a separate locomotive.

Indian Railways decides almost every order

The buyer is, for practical purposes, Indian Railways. It owns three coach-building factories, dozens of workshops and zones, and buys through competitive online tenders on its e-procurement portal, called IREPS.

The flow runs from tender notice to cash in a fixed sequence:

1. A tender team scans notices and checks eligibility, experience and location.
2. Acme bids technical and price documents online, and price bids of qualified bidders are opened with the lowest bidder typically identified.
3. On winning, it gives a bank promise worth around 5-10% of the order value, retained till the defect period of 1-5 years.
4. It builds a prototype for approval, then executes work at a factory or workshop under inspection.
5. Railway authorities certify the work and payment is processed, with about 70% on supply of material and 30% on execution for turnkey and refurbishment jobs.

Warranty withholdings, inspection delays and disputes over defects can hold up money long after work is done.

Revenue has swung from new-coach furnishing to parts and toilets

The company reports five revenue buckets. Turnkey furnishing covers complete interiors for new LHB and Vande Bharat coaches at Modern Coach Factory in Raebareli, Integral Coach Factory in Chennai and Rail Coach Factory in Kapurthala. Refurbishment covers makeovers of old LHB and ICF coaches at workshops. Toilet upgradation covers doors, basins, bowls, flooring and paint. Supply covers parts sold for its own jobs or to others. Others covers services and job work.

Since 2017 it has furnished 1,610 new coaches, refurbished 1,888 old coaches and completed 10,948 toilet upgrades across 28 coach variants.

The mix has changed fast:

Turnkey was once more than half of sales and is now about 8%. Supply is now more than half. Toilets have risen from about 5% to about 22%. Total restated revenue was Rs 263.71 crore in FY26, Rs 210.00 crore in FY25 and Rs 213.43 crore in FY24.

Order book is nearly three times sales and points the same way

As on June 30, 2026 the order book, defined as contract value less value billed, stood at Rs 737.97 crore across 40 orders. Toilets and private supply dominate, while turnkey is small.

The book may not fully convert because of cancellations, scope changes, delays and payment defaults. Private-client supply is new and the buyers are not named.

Sales land almost entirely in the second half

Tenders and execution bunch in October to March, so revenue comes in lumps and year-end receivables spike.

Revenue from Indian Railways was about 47% of total in FY26 and over 88% in the prior two years, with newer PSU and private supply orders starting to diversify the base.

Plants run well below capacity and suppliers are concentrated

Installed capacity is stated on a 24-hour basis while use is on a single shift, certified by a chartered engineer. Use remains around one-third.

Installed levels in 2026 were 4,000 toilets, 1,500 side-wall sets, 1,200 ceiling sets and 12,000 wash basins each. Low use leaves room to grow without new buildings, but long under-use can raise unit costs.

Feeding the plant needs bought materials. Total raw material procurement was about Rs 83.51 crore in FY26 against about Rs 72.33 crore in FY25. Top 10 suppliers made up about 77% of purchases in FY26, up from about 67% and 58% in the prior years. There are no long-term supply contracts. The company now makes wall panels, ceilings and toilet modules in-house to cut dependence.

It had 43 staff on its own rolls plus 235 through an outsourced agency as on June 30, 2026, with daily-wage labour at sites varying by project.

3. Use of Funds

Fresh-issue money, after issue expenses, is planned for:

• Rs 38.00 crore for working capital in 2026-27, mainly to pay suppliers faster and seek discounts
• Rs 41.00 crore to repay or prepay borrowings in full or part
• Rs 6.27 crore for additional plant and machinery such as 3D printers, press brake, laser, welding, router and vacuum-forming machines, for which orders are yet to be placed
• General corporate purposes, capped at 15% of gross proceeds or Rs 10 crore, whichever is lower, with the amount not disclosed

Money from the OFS, which is the 8,01,600 shares sold by promoter Suraj Pandey, goes to the selling shareholder, not the company.

4. Financials Overview

The business is on a restated consolidated basis, covering the parent plus three joint ventures. All three years are full 12-month years ended March 31.

Revenue dipped then rebounded, profit fell then rose faster than sales, margins improved modestly in FY26, and return on net worth, which is profit as a share of year-end net worth, has fallen steadily as equity expanded.

5. What the financials tell us

Acme bounced back in FY26 by selling far more parts as its core new-coach work shrank, so profit grew faster than sales. That profit stayed on paper because customers paid very late, forcing it to stretch suppliers and borrow. Factories are only about one-third full, so growth needs collection and order conversion rather than new buildings.

Supply work replaced furnishing work and lifted profit

Revenue rose to about Rs 264 crore in FY26 from about Rs 210 crore in FY25 after dipping from about Rs 213 crore in FY24. The rise came entirely from Supply-Electrical and Others, which jumped to about Rs 140 crore from about Rs 32 crore.

• Turnkey furnishing fell to about Rs 22 crore from about Rs 108 crore, flipping from over half of sales to under a tenth.
• Toilet upgrades and services also grew, but supply drove the rebound.
• The order book points the same way, with toilets and private supply making up about 78% and turnkey under 9%.

Profit grew faster on the same base. Profit before tax rose to about Rs 33 crore from about Rs 24 crore, and owner profit rose to about Rs 24 crore from about Rs 16 crore. That is healthy operating leverage from mix and scale, but future sales now depend on converting supply, toilet and private-client orders rather than a recovery in furnishing.

Cash stayed locked with customers while suppliers funded the gap

At March-end customers owed about Rs 252 crore against annual sales of about Rs 264 crore, so almost every rupee sold was still to be collected.

• Collection averaged 416 days in FY26, up from 294 and 263 days, because sales bunch in the last quarter and government buyers pay only after inspection.
• Stock also built up, and customer dues jumped by about Rs 94 crore in the year.
• That is why cash used in operations was about Rs 12 crore in FY26 after generating about Rs 24 crore in FY25, despite higher owner profit of about Rs 24 crore.

Supplier dues rose to about Rs 163 crore at 371 payable days, up from 282 and 220 days, because purchases were also skewed late. The plan is to cut payables to around 105 days using Rs 38 crore of IPO working-capital money to earn cash discounts. Paying faster only helps if customers also pay faster, otherwise the cash gap simply moves.

Plants are one-third full, so new machines add precision

Use in FY26 was 36% for toilets, 32% for side walls, 40% for ceilings and 37% for wash basins, with toilet-upgrade parts at only 18%. Both plants run well below full capacity with scope to scale.

• Low use does not block growth, and there is arithmetic room for fixed-cost absorption if volumes rise.
• The proposed Rs 6.27 crore for printers, press brake, laser, welding, router and vacuum-forming gear is not yet ordered.
• The spend is described as improving precision, throughput and reliance on outside vendors rather than relieving full plants.

Whether the gear pays depends on lifting use and turning toilet and private-supply orders into factory volumes. Timing, cost and benefit are not fixed until orders are placed.

Debt looks light until guarantees are counted

On-book debt was about Rs 85 crore against shareholder funds of about Rs 104 crore, or about 82 paise of debt for each rupee owned. That is down from higher levels and looks manageable.

• Off-book claims totalled about Rs 95 crore, led by bank guarantees of about Rs 44 crore and letters of credit of about Rs 30 crore plus tax demands of about Rs 15 crore.
• The planned Rs 41 crore repayment is about half of on-book debt and about two-thirds of fund-based loans owed at June-end, so interest should fall.
• Guarantees, letters of credit and tax claims would remain and can still call for cash.

Equity therefore stays exposed to bank and tax calls that repayment does not remove. Some unsecured loans can also be recalled at any time, and borrowings are secured by stocks, book debts, properties and promoter personal guarantees.

A third of business runs through related parties

Of consolidated revenue of about Rs 264 crore in FY26, about Rs 67 crore came from Vibhata Solutions LLP and about Rs 31 crore from Vibgyor Innovations, together about 37%. The amount owed by Vibhata at year-end was about Rs 79 crore, more than that year's sales to it and about one-third of total receivables.

• Purchases from Vibgyor were about Rs 38 crore, about one-fifth of raw material and stock bought, against sales to it of about Rs 31 crore.
• The reason and pricing for routing so much buying and selling through related parties is not explained.
• The three subsidiaries, owned just over 51% each, lost small sums that together were about 4% of owner profit, with outside owners' share negligible.

The parent itself earned more than the group because subsidiary losses pull the total down, and subsidiaries held under 8% of group assets. The risk is therefore concentration in collection and margin terms with two related entities, not JV losses today.

6. Valuation Analysis

At the top of the band, Rs 196 a share, the IPO values Acme at about 18.9 times its FY26 reported profit on post-issue shares, an earnings multiple that suits a profitable operating company. With no listed peer that does the same tendered coach-interior work, no premium or discount can be measured against the market. The multiple looks demanding rather than earned because profit did not turn into cash, collection rests on one buyer system and related parties, and returns have faded as equity grew. It would look fairer only if late bills are collected faster and supply-led sales convert into cash profit.

7. Peer Analysis

Basis: Acme P/E is post-issue market value on 2,34,72,200 shares divided by FY26 reported owner profit; peers have no market price so no multiple can be shown.

There are no listed companies in India doing a similar business, so no industry comparison of key indicators can be provided.

Acme really compares with two private specialists described in its filing. Chennai Radha is the entrenched factory insider at Integral Coach Factory, handling complete mechanical and electrical furnishing for about two-thirds of its production with decades of credentials. Hindustan Fibre is the materials specialist in composites, windows and modular toilets working with railways since 1949.

Three differences matter. First, Acme is broader under one roof — whole interiors plus panels, toilets and doors — but its mix has flipped from new-coach furnishing to supply and toilets, making revenue more volatile than a focused peer. Second, it lives on lowest-bidder tenders with prototype approval and certification before billing, so sales land in lumps and cash stays locked in receivables and guarantees. Third, its profit came without cash while suppliers were stretched and about a third of sales ran through related parties, which makes the same earnings multiple more expensive in risk terms. With no peer multiple to anchor price, the asking level is not earned on risk-adjusted fundamentals.

8. Moat

Breadth, in-house making and approvals set it apart, but rivals can still underbid

What makes Acme different is doing a lot under one roof rather than selling one part. It bids turnkey interiors, refurbishment and toilets and makes many components itself — fibre-reinforced panels, toilet modules, wash basins, doors and flooring — at Sonipat with testing support. That lets it bid more tender types and keep more work in-house.

Evidence for the edge is execution across 28 coach variants, three production units and many zones, plus ISO 9001 and welding certification and empanelment as a business associate under a Navratna PSU. Exclusive tie-ups for coatings, foils, doors and passenger-information systems lock sourcing that rivals cannot access without similar deals.

Much of this is table stakes in railways — every serious bidder needs approvals, inspections and a track record. What is harder to copy quickly is the combination of whole-interior responsibility plus in-house composites and the credential of over 1,600 new coaches and nearly 11,000 toilet units done.

Government spending on coaches and amenities feeds the funnel

Outside forces help if budgets flow. Mission Retrofitment pushes refurbishment and better passenger amenities. The Union Budget provides large capital outlays for railways, including rolling stock and customer amenities. New-coach output has risen, which expands furnishing demand per coach, while toilet modernisation across thousands of coaches creates a multi-year stream. Acme's levers are to fill spare capacity, enter wagon repair and add surveillance and information systems with a Korean partner.

The edge lasts only as long as tenders, approvals and cash hold

Durability is bounded. Sales remain railway-linked, awards go to the lowest qualified bidder, and new entrants can bid thin margins. Supplier concentration, slow receivables and guarantees can quickly offset factory advantages. If tender flow slows, quality is disputed or payment stretches, fixed costs and debt service work the other way. There is no contractual lock-in beyond approvals and repeat orders earned on delivery.

9. Risks

One buyer decides revenue. Railways and its PSUs drive sales through tenders that can be cancelled, re-priced or lost on price. Direct Railways share fell to about 47% in FY26 as private supply grew, but policy, budget or inspection calls still swing volumes. This is idiosyncratic to a single-buyer model, not industry-wide.

Order book may not become sales. The Rs 738 crore book is nearly three times FY26 sales yet covers only 40 orders, with toilets and private supply dominant. Cancellations, scope changes and execution delays can cut expected income and margins.

Cash is tied in receivables and guarantees. Customer dues near annual sales plus unbilled work and retention money force higher borrowing. Debtor days rose from 263 to 416 days while payable days stretched to 371 days. Partial payment of 70% on supply helps but does not fix late certification and warranty withholdings. This has worsened over the period.

Suppliers and related parties concentrate risk. Top 10 suppliers are about 77% of purchases with no long-term contracts, so price or delivery slips can halt sites. About a quarter of sales and a third of receivables sit with one related party, and a fifth of buying comes from another, so terms are not purely market-tested.

Off-book claims rival net worth. Guarantees, letters of credit and tax demands near equity can turn into outflows. Repayment cuts on-book debt but not these calls. Recallable unsecured loans, promoter personal guarantees and charges over stocks and properties add funding fragility.

Governance and execution flags. Extensive related-party dealings, audit-trail gaps in accounting software through the year, criminal proceedings against the company and objected trademarks bear watching, alongside leased factories and dependence on two promoters and a small core team.

10. Verdict

The call rests on four load-bearing facts already laid out: supply-led sales have replaced furnishing work, almost a year of sales remains uncollected with a third owed by one related party, suppliers fund the gap at over a year of payables, and off-book guarantees rival equity even after debt repayment. Together they show profit without cash, falling returns and single-system dependence. At about 18.9 times FY26 profit with no listed peer to justify it, the price asks investors to pay for growth that has not yet been collected. The thesis works only if certification and collection shorten and toilet and private-supply orders turn into cash profit; it breaks if receivables stretch further, related-party dues lag or guarantees are called.