Swastika Infra: rapid power-EPC growth that has never produced cash

1. IPO Overview

Swastika Infra Limited is a mainboard book-built offer that pairs a fresh issue of up to Rs 129 crore with an offer for sale, usually called OFS, of up to 17,50,000 shares sold by existing owners.

• Price band is Rs 175 to Rs 185 a share of face value Rs 10.
• Offer opens Wednesday, September 23, 2026 and closes Friday, September 25, 2026.
• Fresh issue brings cash to the company, while OFS cash goes to six selling shareholders.
• Pre-issue capital is 2,71,74,242 shares, with promoters holding 76.51%.
• Listing is proposed on BSE and NSE, with QIB, non-institutional and retail portions.
• Lead managers are Srujan Alpha Capital Advisors LLP and PhillipCapital India, with MUFG Intime as registrar.
• At the top of the band, Rs 185 a share, post-issue market value is Rs 631.72 cr on 3,41,47,215 shares, while at the floor it is Rs 604.55 cr on 3,45,45,671 shares.
• Post-issue P/E on reported FY26 profit is 15.2x at upper end, while pre-issue P/E on FY26 EPS is 11.1x at Rs 175 and 11.8x at Rs 185.
• Return on net worth, which measures profit as a share of average net worth, was 35.44% in FY26 on a restated standalone basis.
• The unusual point is that the entire fresh issue funds working capital and general corporate needs, with no loan repayment, even though guarantees of Rs 272.68 crore exceed net worth and operating cash has been negative for three years.

2. What the company does

How a turnkey power contract works

Swastika Infra is an engineering, procurement and construction contractor for power distribution and now transmission and solar evacuation. It bids for tenders from state utilities, then handles survey, design, procurement, erection, testing and commissioning on a fixed-sum turnkey basis. The company has no subsidiary, so its restated standalone accounts for the 12 months ended March 31 in each of FY24, FY25 and FY26 cover the whole business. It starts work on a government portal, where technical qualification comes first and price usually decides the winner. In FY26 it bid for 28 tenders and won eight, a 29% win rate, against 20% in FY25 and 38% in FY24. Its central team of 65 engineers in Jaipur designs and supervises, while third-party sub-contractors supply site labour and equipment. Central buying procures cables, transformers and ring main units in bulk, which explains why material cost dominates expenses.

EPC is the engine, trading is the leftover

Revenue comes from two lines, but one now dominates. EPC Power Projects contributed Rs 487.82 crore or 97% of revenue from operations in FY26, Rs 339.04 crore or 97% in FY25, and Rs 188.28 crore or 90% in FY24, all restated standalone. Sale of products, which means trading wires, cables and breakers, added Rs 15.75 crore in FY26, Rs 11.71 crore in FY25 and Rs 21.30 crore in FY24. Total revenue from operations was therefore Rs 503.57 crore in FY26, Rs 350.76 crore in FY25 and Rs 209.58 crore in FY24. The mix shift is clean contracting growth, with trading falling from about 10% to about 3% as EPC scaled.

Five EPC offerings around one core skill

Underground cabling up to 33 kV remains the historic core, with 18,579.47 km laid to July 31, 2026. It covers route survey, excavation, laying, jointing and testing, as seen in Jaipur, Mapusa, Siliguri and Kharagpur conversions. Substation construction covers gas-insulated, air-insulated and grid substations, including recent 132 kV orders with lines at Kanota, Bagru and Kolayat. Rural and urban electrification upgrades 33/11 kV substations, feeders, transformers and household connections under schemes such as IPDS, DDUGJY and RDSS. Street lighting installs LED systems, though revenue is not split out. Renewable works are the new extension and include power evacuation for a 2,450 MW solar park at Pugal worth Rs 158.12 crore, four Rajasthan transmission orders totalling Rs 170.51 crore, a 15 MW solar plant in West Bengal worth Rs 64.20 crore, and solar pumps in Maharashtra worth Rs 4.43 crore. None of the solar and transmission orders had execution recorded to July 31, 2026.

Order book gives visibility but concentrates risk

Order book means expected revenue from uncompleted contracts where allotment conditions are met. It stood at Rs 687.44 crore at end-FY26, Rs 650.23 crore at end-FY25 and Rs 391.39 crore at end-FY24. By July 31, 2026 it had risen to Rs 916.55 crore from aggregate orders of Rs 2,036.65 crore across 18 projects in six states. That cover was 1.41 times FY26 revenue, down from 1.92 times and 2.08 times, because execution outpaced awards. The top two balances dominate, with Sikar RDSS at Rs 225.34 crore or 24.58% and Pugal solar evacuation at Rs 158.12 crore or 17.25%. Funding is largely public, with central, state and World Bank money plus Rs 328.63 crore to be funded from internal resources and borrowings. Since 2012 it has completed 36 projects worth Rs 764.67 crore, led by Kharagpur at Rs 195.02 crore and Mapusa at Rs 120.33 crore.

Customers are governments, and very few of them

Buyers are almost entirely government utilities and departments, including West Bengal, Gujarat, Goa, Himachal Pradesh, Haryana, Rajasthan and Maharashtra entities. Government utilities gave 96.87% of revenue in FY26 and 100% of the July 2026 order book. Concentration is extreme, with the top one client at Rs 158.32 crore or 31.44% in FY26, down from 60.97% in FY24, while the top five gave Rs 487.82 crore or 96.87% and the top ten gave 99.58%. Four customers each exceeded 10% of EPC sales in FY26. Geography rotates as jobs finish, so a zero in a year means no execution there.

Money arrives late and after deductions

Clients pay on milestones, hold retention money until completion, and release mobilisation advances of 5% to 7.5% in two tranches against 110% bank guarantees. Performance guarantees up to 10% of tender value and letters of credit need margin deposits of 10% to 20%. Revenue is recognised over time by percentage of completion, while trading is recognised when control passes. Retention was Rs 160.02 crore in FY26, Rs 98.78 crore in FY25 and Rs 42.58 crore in FY24. Unbilled revenue was Rs 41.47 crore, Rs 31.48 crore and Rs 8.36 crore. Mobilisation advances were Rs 30.41 crore, Rs 12.70 crore and Rs 13.66 crore. The model is asset-light, with leased equipment, sub-contracted erection and 182 full-time staff plus site labour, so fixed-asset turnover was 70.72 times in FY26. Where qualification requires it, the company bids as lead partner in project joint ventures that are treated as its extension and have no impact on restated accounts.

3. Use of Funds

The fresh issue, net of offer expenses that are still marked [●], will be used as follows.

• Funding incremental working capital requirements: up to Rs 90 crore, to be deployed in FY27.
• General corporate purposes: amount still marked [●].
• Together with the Rs 40 crore pre-IPO placement already used for working capital, the working-capital programme totals Rs 128.09 crore net.
• There is no object for repayment of borrowings.
• All OFS proceeds go to the six selling shareholders and not to the company.

4. Financials Overview

All figures below are restated standalone for the 12 months ended March 31, in Rs crore unless stated.

Revenue compounded at about 55% over FY24 to FY26, while profit grew faster and margins widened. Leverage spiked in FY25 and then fell in FY26 only because a Rs 40 crore pre-IPO placement lifted equity. The deep dive follows next, so this table is only the starting point.

5. Financial Analysis

Concentrated EPC revenue base

Growth is real contracting work, but it rests on four to five buyers. EPC rose from 89.84% to 96.87% of revenue while trading fell, driving the two-year expansion. Yet the top five supplied 96.87% of FY26 revenue and the top ten supplied 99.58%, with the top one alone at 31.44%. Four customers each exceeded 10% of EPC sales and together totalled about 90%. All EPC sales are labelled as including unbilled revenue with no billed split, so certification by one client can move reported revenue, profit and cash together. Losing or delaying a single tender is therefore an earnings event.

Margin expansion from flat staff cost

EBITDA margin rose from 11.31% to 14.07% and net margin from 6.67% to 8.23% over FY24 to FY26. The gain came from spreading staff cost, not from pricing power. Employee benefits were Rs 14.79 crore in FY24, Rs 12.24 crore in FY25 and Rs 13.77 crore in FY26, while revenue rose 2.4 times. Employee cost to revenue fell from 7.06% to 2.73%. Director pay alone fell from Rs 5.73 crore to Rs 3.73 crore. Meanwhile site costs are rising, with labour cess at Rs 3.51 crore in FY26 and legal and professional fees at Rs 5.22 crore. Other income of Rs 2.00 crore is only 3.61% of pre-tax profit, so profit needs no cleaning, but its quality rests on a lean headcount that must supervise many more sites.

Profit locked with customers, never converted to cash

Two-thirds of a year of sales sits with customers. Trade receivables rose to Rs 114.98 crore in FY26 from Rs 31.43 crore in FY24, while retention rose to Rs 160.02 crore and unbilled revenue to Rs 41.47 crore. Together they reached Rs 316.47 crore or 62.8% of revenue, equal to 229 days of sales, up from 39.3% and 143 days. Receivable days lengthened from 54.7 to 83.3, and retention alone was 31.8% of revenue. As a result operating cash was negative in all three full years at Rs -3.34 crore, Rs -76.54 crore and Rs -9.65 crore, against profits of Rs 13.98 crore, Rs 27.45 crore and Rs 41.43 crore. Free cash flow after capex was also negative every year. Operating profit before working capital of Rs 66.70 crore in FY26 was wiped out by a Rs 62.35 crore working-capital drain.

Short-term creditor funding and understated leverage

Growth was funded by current debt and suppliers. Total borrowings were Rs 114.64 crore at March 31, 2026, almost all current, against Rs 111.02 crore a year earlier and Rs 43.82 crore in FY24. Inside that, channel finance and TReDS supplier finance rose to Rs 72.62 crore or 64.8% of current borrowings. Micro and small enterprise dues jumped 57 times to Rs 38.52 crore, payables days stretched from 46.1 to 71.8, and statutory dues snapped back to Rs 7.85 crore. The FY26 cash improvement came from a Rs 45.58 crore rise in payables and Rs 25.14 crore in other current liabilities, not from collection. Finance cost doubled to Rs 16.90 crore or 3.36% of revenue, cover fell to 4.27 times, and cash interest of Rs 14.57 crore lagged the charge by Rs 2.33 crore. Off-balance-sheet bank guarantees of Rs 272.68 crore were 173.9% of equity after rising 122% in FY26. All bank debt also carries personal guarantees from five insiders, with related-party loans churning through the year.

6. Valuation Analysis

For a profitable contractor the right lens is earnings, not book or asset value. At the top of the band, Rs 185 a share, the company asks 11.8x FY26 basic EPS of Rs 15.70 on a weighted average 2,63,90,514 shares, and 11.1x at the floor Rs 175. That pre-issue multiple sits inside the listed peer range of 10.1x for Rajesh Power and 14.6x for Vikran, just below the 12.35x median. On the comparable pre-issue basis there is no discount for weaker quality, including smaller scale, higher debt-equity of 0.73 times, thinner 1.41 times order cover, top-five dependence near 97%, three years of negative operating cash, 229 days locked with customers, and guarantees at 174% of net worth. Paying the peer median multiple for profit that has never become cash, without any deleveraging from the issue, looks demanding.

7. Peer Analysis

P/E for peers uses closing price on August 26, 2026 divided by FY26 basic EPS on a consolidated basis, while Swastika pre-issue uses FY26 restated standalone EPS of Rs 15.70 and post-issue uses reported profit over post-issue capital.

Source: RHP — 8. Comparison of KPIs with Listed Peers; page 131. Basis: Consolidated.

Rajesh Power grew fastest, with revenue up 51.9% in FY26 and a two-year CAGR of 139% on underground transmission and substation execution, followed by Swastika at 43.6% and 55% on EPC mix shift and larger tickets, then Vikran at 36.4% and 26.1% as solar, water and rail diversification diluted margins. Swastika expanded EBITDA margin by 276 basis points to overtake Rajesh in FY26, while Vikran compressed from 18.21% to 15.38% on water provisions. Rajesh leads on returns with RoNW of 42.68% and RoCE of 37.77%, against Swastika at 35.44% and 25.76% and Vikran at 10.76% and 12.33% after equity expansion.

The businesses overlap but differ in breadth. Swastika is pure government distribution EPC with 100% of its order book from utilities. Rajesh does similar underground and substation work but adds private clients such as Torrent and Grasim, plus O&M and a battery storage project, with an order book of Rs 3,326 crore or 2.04 times revenue. Swastika collects faster than Vikran at 296 debtor days but slower than before, with retention at 120 days of EPC revenue. Leverage is highest at 0.73 times against 0.31 and 0.24 times, and visibility is thinnest at 1.41 times.

Working-capital stress is partly industry-wide, since Rajesh also cites retention and Vikran carries large water receivables, but Swastika-specific severity stands out in concentration, unbilled profit, guarantee load and creditor stretch. Overall, asking a peer-median multiple without peer-median scale, diversification, returns or cash conversion is not earned.

Note: peer operating figures above come from the peers' own transcripts, presentations and annual reports, while Swastika figures come from its DRHP, except the growth and profitability table where both sides come from the DRHP.

8. Moat

There is execution credibility but no durable moat. Fifteen years, 18,579 km laid and pre-qualifications for World Bank and central schemes help Swastika win and retain government work. Yet entry barriers are low, rivals can qualify alone or through joint ventures, and tenders are decided on price after qualification. The asset-light model adds flexibility without pricing power, so advantage is qualification-based and must be re-earned in every bid.

9. Risks

• Customer and order concentration, idiosyncratic and worsening with scale. Top five at 96.87% and top two projects at 41.83% of the book mean one delay or loss swings revenue and guarantees together.
• Government payment and certification risk, industry-wide but acute here. Retention at 31.8% of revenue and unbilled at 8.24% must be certified, while audit claims in Rajasthan show recoveries can follow completion.
• Cash conversion and funding risk, idiosyncratic in degree. Negative operating cash for three years, 229 days locked with customers and closing cash of Rs 1.67 crore against Rs 114.64 crore of borrowings leave growth dependent on TReDS, payables and fresh equity.
• Guarantee and covenant risk, idiosyncratic. Guarantees at 173.9% of net worth can become immediate outflow on delay or default, while working-capital loans are repayable on demand and backed by promoter property and personal guarantees.
• Governance and related-party risk, idiosyncratic but contained. Insider procurement, short-term promoter loans and past secretarial lapses persist, though there is no subsidiary leakage and other income is immaterial.

10. Verdict

The call rests on four load-bearing facts already shown: top-five dependence near 97% with unbilled profit, margins lifted by flat staff cost while interest doubled, three years of profit without operating or free cash and 229 days locked in receivables and retentions, and a creditor-funded balance sheet with guarantees far above equity. Together they mean reported growth screens well on RoNW and EBITDA margin but has been bought with customer credit and supplier money. For the thesis to work, retention and unbilled must convert to cash and operating cash must turn positive without stretching payables. It breaks if one large client delays certification, if guarantees are invoked, or if TReDS and MSME funding tightens. At 11.1 to 11.8 times pre-issue earnings, in line with peers but without their scale, diversification or cash quality, valuation offers no compensation for that liquidity risk.

11. IPO Snapshot