Laser Power & Infra IPO: deep discount to peers

1. IPO Summary

2. Business Overview

Laser Power & Infra is an integrated manufacturer of power cables, conductors, and specialised products, with a second arm that executes turnkey engineering, procurement, and construction (EPC) projects in the power distribution sector. The company has operated for over three decades and built a reputation for delivering high‑quality products tailored to customer specifications.

Manufacturing segment (57.46% of FY26 revenue from operations – ₹1336.65 crore)
- Products: low‑voltage (LV) and medium‑voltage (MV) power cables, aerial bunched cables (ABC), control and quad cables, railway signalling cables (RDSO‑approved), and a full range of overhead conductors (ACSR, AAC, AAAC, AL‑59, eco‑conductors, HTLS conductors including aluminium‑encapsulated carbon‑core – AECC).
- Speciality products: in‑house aluminium wire rods, alloy rods, PVC/XLPE compounds used for insulation and sheathing, providing backward integration.
- Three manufacturing units in West Bengal with a combined installed capacity of 85,448 MT as at March 31, 2026.
- Key differentiators: largest cable/conductor manufacturing capacity in East India (per CRISIL); RDSO‑approved supplier for railway cables; strategic manufacturing agreement with TS Conductor Corp (USA) to produce advanced HTLS conductors locally.
- Capacity utilisation fell from 85.79% in FY24 to 61.59% in FY26, as capacity additions (up 37.82% over the same period) outpaced order intake.

EPC segment (42.5% of FY26 revenue – ₹989.45 crore)
- Turnkey contracts for design, supply, erection, testing and commissioning of 33/11 kV substations, HT/LT overhead lines, underground cabling, feeder segregation, and rural/urban electrification.
- Clients are primarily state DISCOMs under government schemes (RDSS, DDUGJY, IPDS, Saubhagya). Also executed one water‑supply project and one solar EPC project (through subsidiary Akshat Builders).
- As at March 31, 2026, completed 43 projects and has 34 ongoing orders across multiple Indian states.
- Revenue recognised over time (percentage‑of‑completion), inherently lumpy.

Integrated model: The manufacturing division supplies products both to external customers and to the company’s own EPC division (inter‑segment sales of ₹354.39 crore in FY26). This backward integration reduces procurement cost and improves project margins. However, the EPC segment’s long payment cycles (60% of supply value within 60 days, 30% after installation, 10% after commissioning) strain working capital.

3. Industry Tailwinds

- Power sector investment: According to the CRISIL report commissioned for the IPO, India’s wires and cables market is expected to grow at 11–13% CAGR between FY25 and FY30, reaching ₹235,000–255,000 crore by FY30. Conductors market is forecast to grow at ~5–6% CAGR over the same period.
- Government schemes: RDSS (Revamped Distribution Sector Scheme) with a budget of ₹18,000 crore in FY27; DDUGJY, IPDS, Saubhagya; railway electrification (99% broad‑gauge already electrified); metro rail projects; and renewable energy capacity additions (140–160 GW solar, 25–27 GW wind over FY26–30).
- Grid modernisation, reconductoring, and underground cabling in cyclone‑prone coastal states are driving demand for high‑performance conductors and cables.
- Export growth: wires & cables exports grew from ₹4,900 crore in FY20 to ₹14,500 crore in FY25 (CAGR 24.4%); conductors export grew 12.5% CAGR over same period.

Laser Power is positioned to benefit, but its heavy reliance on government customers (65.2% of FY26 revenue) and top‑10 customer concentration (72.1%) make it vulnerable to policy shifts and tender delays.

4. Competitive Position

Peer comparison (based on RHP data – FY26):

Peer P/E based on closing NSE price on 19 June 2026 and diluted FY26 EPS.

Laser trades at a deep discount to peers – about 72% below the median peer P/E of 56.98×. This discount is justified by:
- Weakest growth: 2‑year revenue CAGR of 15.37% vs. peers 19–27%.
- Highest leverage: net debt/equity 1.10× (peers are net‑cash or low debt).
- Poor cash conversion: negative operating cash flow in FY26.
- High customer concentration and governance flags.

Key competitive strengths (narrow moat):
- Largest cable/conductor capacity in East India; RDSO accreditation.
- Strategic alliance with TS Conductor for advanced HTLS conductors.
- Backward integration into aluminium wire rods and compounds.
- Integrated EPC arm creates captive demand.

Weaknesses:
- Commoditised products; contracts won through price‑bidding.
- Capacity utilisation falling; scale advantage underutilised.
- Business model requires heavy working capital; limited pricing power.

5. Financial Performance – Key Takeaways

(All figures from Restated Consolidated Financial Information, RHP)

Critical observations:

1. Revenue dip in FY26 despite a growing order book (₹2,172.70 crore in FY24 to ₹3,243.40 crore in FY26). The company attributed this to lower manufacturing sales due to raw material shortages and postponement of customer orders amid geopolitical uncertainty.

2. EBITDA margin improvement from 8.93% to 12.96% appears positive, but it partly reflects favourable mix and one‑off items (exceptional gain of ₹32.79 crore). Excluding the exceptional gain, EBITDA margin would be around 11.6%.

3. PAT inflated by exceptional gain: FY26 PAT includes a non‑recurring gain of ₹32.79 crore from the deconsolidation of former subsidiary UIC Udyog (sold in April 2025). Adjusted PAT would be approximately ₹118.80 crore (EPS ~₹10.80 vs. reported ₹13.18). The adjusted RoE would drop to roughly 16–17%.

4. Cash conversion disaster: Trade receivable days surged from 145 in FY24 to 196 in FY26, while revenue fell. Net working capital days rose to 138. Operating cash flow turned deeply negative (‑₹119.05 crore) despite reported profit of ₹151.59 crore. Cumulative OCF over three years (₹112.10 crore) covered only 37.5% of cumulative PAT (₹298.75 crore). The company is not collecting cash from its operations; it is borrowing to fund working capital.

5. Leverage ballooning: Total borrowings rose 64.7% to ₹828.23 crore in FY26. Net debt/equity hit 1.10×. Interest coverage is thin at 2.21×. The IPO’s primary use – repaying ₹490 crore of debt – will improve the balance sheet, but if working capital remains strained, debt may quickly re‑accumulate.

6. Capacity utilisation decline: From 85.79% in FY24 to 61.59% in FY26 suggests that the company’s recent capacity expansion has not been matched by order flow. This could lead to asset impairment risk if utilisation remains low.

6. Segment‑wise Revenue Breakdown

Note: The inter‑segment eliminations reflect manufactured goods consumed internally for EPC projects. This captive consumption increased to ₹354.39 crore in FY26 (from ₹259.64 crore in FY24), supporting the EPC arm but not generating external revenue.

7. Risks

- Customer concentration: Top 10 customers contributed 72.14% of FY26 revenue; single largest 24.82%. Loss of one major government tender could severely impact revenue.
- Working capital strain: Receivable days of 196, net working capital at 43.8% of revenue, leading to negative operating cash flow. The company requires continuous external financing.
- Raw material volatility: Aluminium, copper, and polymer prices fluctuate; pass‑through clauses may not fully protect margins.
- Falling capacity utilisation: 61.59% in FY26 vs. 85.79% in FY24; over‑investment risk if demand doesn't materialise.
- High leverage and covenants: Net debt/equity 1.10×, interest coverage 2.21×. Restrictive covenants in borrowing agreements limit financial flexibility.
- Governance flags: Auditor CARO remarks for all three years: title deeds of certain immovable properties not in company’s name; differences between book values and statements submitted to banks; undisputed statutory dues outstanding beyond six months; weak internal controls.
- EPC lumpiness: Revenue recognition over time; project delays or liquidated damages could hit profitability.
- Subsidiary drag: Akshat Builders Private Limited has negative net worth and outstanding loans of ₹9.19 crore from the parent, with a solar EPC project that requires significant upfront capital.
- One‑time gain masks underlying earnings: FY26 PAT includes ₹32.79 crore exceptional gain; without it, profitability is weaker.
- Competition: From large listed players (Apar, Polycab, KEI) and other regional manufacturers; pricing power is limited.

8. Valuation Analysis

- Reported basic EPS (FY26): ₹13.18
- Adjusted EPS (ex‑exceptional): ~₹10.80
- price band: ₹203–₹214
- P/E on reported EPS: 18.8×–19.8×
- P/E on adjusted EPS: ~24×–25x
- Price/book (pre‑offer NAV ₹63.06): 3.2×–3.4×
- Peer median P/E: ~57× (vastly higher quality)

The deep discount reflects the market’s correct assessment of Laser’s inferior cash generation, high leverage, and execution risk. Until the company demonstrates sustained positive operating cash flow and receivable days below 150, the discount is likely to persist.

9. Summary and Outlook

Positives:
- Integrated business model with captive demand.
- Beneficiary of multi‑year government electrification schemes and railway capex.
- Strategic partnership for advanced HTLS conductors (differentiator).
- Large manufacturing capacity in East India.
- Post‑IPO, debt reduction will improve balance sheet.

Negatives:
- Deteriorating cash conversion; operating cash flow negative in FY26.
- Extremely high customer concentration.
- Falling capacity utilisation signals weak demand or execution issues.
- Reported profit overstated by one‑off gain.
- Governance and internal control weaknesses flagged by auditors.