Dhoot Transmission Limited IPO

Dhoot Transmission is launching a mainboard IPO on BSE and NSE. The offer has two parts:
- Fresh issue of up to ₹1,400 crore (proceeds go to the company).
- Offer for sale (OFS) of up to 1.63 crore shares by two selling shareholders — BC Asia Investments XV Limited (a promoter entity) and Mangalam Capital Private Limited (a promoter group entity). OFS proceeds go entirely to those sellers.

Pre-issue, promoters hold 84.87% of the 18.85 crore outstanding shares.

Use of Funds

The fresh issue of up to ₹1,400 crore is earmarked for:

• Repayment or prepayment of certain outstanding borrowings of the company: ₹493.99 crore
• Investment in four subsidiaries (Dhoot Autocomponents, Dhoot Electricals Systems, Dhoot Automotive Systems, and Dhoot Transmission UK) for repayment of their borrowings: ₹272.59 crore
• Setting up a new wiring-harness plant at Jhajjar (Haryana) and Shoolagiri (Hosur, Tamil Nadu): ₹150 crore
• Funding inorganic growth through acquisitions, and general corporate purposes (amount not specified)

The OFS proceeds go to the selling shareholders — BC Asia Investments XV Limited and Mangalam Capital Private Limited — not to the company.

IPO Snapshot

Dhoot Transmission makes the electrical “nervous system” for vehicles — primarily two-wheelers and three-wheelers. Its core product is the wiring harness: a bundled network of cables, connectors, terminals, sensors and controllers that carries power and signals through a vehicle. Think of it as the loom that connects the battery to the headlight, the throttle sensor to the engine control unit, and the brake switch to the tail lamp. In an electric vehicle, a second high-voltage harness links the battery pack to the motor controller.

The company is a Tier-1 supplier, meaning it sells directly to vehicle manufacturers (OEMs) and also to other Tier-1 and Tier-2 component makers. It operates 20 wiring-harness plants globally, mostly clustered near OEM factories in Maharashtra, Tamil Nadu, Haryana and Madhya Pradesh, enabling just-in-time delivery. As of the nine months ended December 2025, its installed wiring-harness capacity was 1.02 crore equivalent units, running at 75.40% utilisation.

How it earns: Revenue is straightforward — the number of harnesses and other components shipped, multiplied by the price per unit set in customer purchase orders. There are no firm long-term volume commitments. Dhoot works on rolling forecasts and purchase-order releases from OEMs. A useful proxy for growth is the “kit value per vehicle” — the total value of Dhoot’s content in each vehicle. That kit value has been rising for three reasons:

• Electrification: An EV two-wheeler needs 1.5x to 2.5x more wiring-harness content by value than an ICE equivalent.
• Premiumization: Features like USB-C chargers, LED lighting, digital instrument clusters and ABS add more circuits and connectors.
• Regulation: The shift from BS-IV to BS-VI emission norms doubled harness complexity; the ABS mandate for all two-wheelers from January 2026 adds a further wiring sub-system.

So even if OEM vehicle volumes grow modestly, Dhoot’s revenue can outpace that growth because its content per vehicle expands.

The product lines: Wiring harnesses are the backbone, contributing 78.00% of revenue in FY2025 and 77.15% in the nine months ended December 2025. The rest comes from a growing “Others” bucket: battery packs for electric two-wheelers, sensors (ABS wheel-speed, lean-angle, temperature), electronic controllers (USB chargers, light-control modules, DC-DC converters), automotive switches, and power-supply cords. The company also makes terminals, connectors and moulded parts in-house, giving it backward integration and cost control.

Revenue mix by end-market (FY2025):

EV revenue as a share of total revenue has tripled — from 8.05% in FY2023 to 25.22% in FY2025 — reflecting the rapid electrification of India’s two-wheeler and three-wheeler fleets.

Customers: The customer base is concentrated. The top 10 customers accounted for 81.72% of revenue in the nine months ended December 2025, and the top five for 72.49%. The largest single customer is Bajaj Auto Limited at 32.33% in that stub period (35.08% in FY2025). Other named customers include TVS Motor Company (19.47%), Honda Motorcycle and Scooter India (10.58%), and Royal Enfield (4.86%). The average relationship with the top five customers is 13 years, and no top-five customer has been lost in the last three years. OEMs typically maintain only a small number of approved suppliers per component category, and getting approved takes 12–18 months of rigorous testing. Once a harness is designed into a vehicle platform, the relationship usually lasts the life of that platform — three to five years for two-wheelers.

Competitive position: Dhoot is among the top two players in wiring harnesses for Indian two-wheelers and three-wheelers, with a combined market share of 44.64% in FY2025. In the electric two-wheeler and three-wheeler segment, it claims a leadership position with more than 70% market share. The wiring-harness industry is oligopolistic: the main competitors are Motherson Sumi Wiring India (focused on passenger vehicles), Minda Corporation, and Uno Minda. Dhoot’s edge comes from its early investment in EV capabilities, deep OEM relationships, and backward integration into terminals, connectors and cables.

All figures are on a restated consolidated basis. The nine-month period ended December 2025 is a stub — it is not comparable to a full year.

Revenue grew 31.6% in FY2024 and 23.1% in FY2025 — strong, but the pace is slowing. Profitability peaked in FY2024: EBITDA margin hit 18.31% and PAT margin 10.67%, then both began to ease as raw-material costs and finance costs rose. The stub period shows further margin compression, with PAT margin at 9.19%. RoNW, which touched 39.88% in FY2024, dropped to 23.03% in the stub — though that stub figure is not annualised and partly reflects a large common-control adjustment that reduced equity.

Financial Analyst Responses

Customer concentration and revenue growth sustainability

Revenue growth has been impressive — from ₹2,125.86 crore in FY2023 to ₹3,444.86 crore in FY2025, a two-year CAGR of about 27%. But this growth rests on a narrow customer base. The top five customers’ share of revenue has climbed from 64.67% in FY2023 to 72.49% in the nine months ended December 2025. Bajaj Auto alone contributed 35.08% in FY2025 and 32.33% in the stub. There are no long-term volume commitments — business runs on rolling forecasts and purchase orders. If any one of these top customers were lost, the revenue impact would be material and immediate. The rising concentration, even as revenue scales, means the company is not diversifying its customer base as it grows; it is deepening its dependence on a handful of OEMs.

Deteriorating margins and earnings quality

The headline margins have been slipping from their FY2024 peak. EBITDA margin fell from 18.31% in FY2024 to 17.15% in FY2025 and 16.38% in the nine-month stub. PAT margin (parent share) followed the same path: 10.67% → 10.19% → 9.19%. Two forces are at work. First, raw-material cost as a percentage of revenue, which had improved from 67.52% in FY2023 to 64.50% in FY2024, has crept back up to 65.25% in the stub. Second, finance costs as a percentage of revenue have risen from 1.77% in FY2024 to 2.11% in the stub, reflecting higher debt.

Beyond the trend, the quality of reported earnings is weak. In FY2025, other income of ₹27.37 crore included a ₹21.34 crore gain on sale of a subsidiary and a ₹3.11 crore gain on retirement — together, 89% of other income was one-off. In the nine-month stub, other income included ₹11.35 crore of government grants and ₹12.77 crore from unwinding of a discount on a share call amount receivable — both non-operating. The stub also carried an exceptional loss of ₹16.39 crore. Stripping out that exceptional item, the adjusted PAT margin for the stub would be 9.79%, still below FY2024 levels. Investors looking at the reported PAT should discount these non-recurring boosts.

Working capital strain and cash flow challenges

The most troubling operational trend is in receivables. Consolidated receivable days have stretched from 46 days in FY2023 to 55 days in FY2024 and 64 days in FY2025 — a 39% increase over two full years. At the same time, the share of trade receivables classified as "not due" has shrunk from 94% in FY2023 to 81% in FY2025. Based on the DRHP context, "not due" means the invoice's payment term has not yet expired — the customer is still within the agreed credit period (typically 30–60 days for this company). These receivables are not yet overdue, so they represent the portion of the book that is current and on schedule. The shrinking share from ~94% to ~81% means a growing share of receivables is past due, which is the ageing concern flagged in the report. This pattern often signals either aggressive revenue recognition (booking sales on extended credit to pull forward growth) or deteriorating collection terms with customers. Either way, it means revenue is converting into cash more slowly.

That working-capital strain shows up in the cash flow statement. In FY2024, changes in working capital absorbed ₹185.20 crore — 62% of that year’s PAT. In FY2025, working capital absorbed another ₹164.03 crore, or 46% of PAT. Trade receivables alone rose by ₹152.58 crore in FY2024 and ₹182.83 crore in FY2025. Inventories also climbed — up ₹68.93 crore in FY2024 and ₹88.45 crore in FY2025.

Free cash flow (operating cash flow minus net capex) turned negative in FY2024 at ₹(31.25) crore and worsened to ₹(64.68) crore in FY2025, after a positive ₹99.65 crore in FY2023. The company funded this gap — and its acquisitions — through net borrowings of ₹132.16 crore in FY2024 and ₹221.13 crore in FY2025, plus an equity issuance of ₹716.03 crore in the nine-month stub (which exactly matched a payment for a business combination, likely a share swap). Over the three full years, cumulative operating cash flow of ₹797.30 crore covered 98% of cumulative PAT of ₹816.54 crore — a reasonable ratio — but the trend is deteriorating, and the business is not self-sustaining without external capital.

Related-party transactions and opaque group structure

The company has undertaken unusually large related-party transactions, particularly around a complex group restructuring. In the nine months ended December 2025, it purchased equity shares of Dhoot Holdings Private Limited (DHPL) from promoter Rahul Dhoot for ₹767.51 crore and from his spouse Anupama Dhoot for ₹187.20 crore. It also entered into supply deals with entities owned by the same promoter group — Yuvan Electrical, Tack Electric, Ekaksh Transmission — with total related-party expenses of ₹71.95 crore in the stub, equal to 2.51% of total expenses. As of December 2025, outstanding consideration payable to Rahul Dhoot was ₹191.88 crore and to Anupama Dhoot was ₹46.80 crore.

The consolidation mechanics further obscure the picture. The statement of changes in equity shows a “common control adjustment deficit” of –₹937.51 crore in the nine-month stub alone, reflecting the book-value acquisition of DHPL from the promoters. Across FY2024 and FY2025, similar adjustments of –₹23.88 crore and –₹113.89 crore created gaps between opening equity plus total comprehensive income and closing equity. The net effect is that shareholders’ reported equity is significantly lower than what organic profit would imply, making it hard to track true retained earnings.

The DRHP identifies four listed peers: Minda Corporation, Uno Minda, Motherson Sumi Wiring India (MSWIL), and Sona BLW Precision Forgings. The table below uses FY2025 financials as disclosed in the DRHP (closing price as of May 8, 2026). Note that peer figures come from the peers’ own disclosures; Dhoot’s figures come from its DRHP.

How Dhoot stacks up:

• Growth: Dhoot’s FY2025 revenue growth of 23.1% is the highest among the direct wiring-harness peers. MSWIL grew 11.9%, Minda Corporation 8.7%, and Uno Minda 19.6%. Sona BLW, which is not a wiring-harness peer but an EV component play, grew at a different pace. Dhoot’s growth has been driven by electrification and content-per-vehicle expansion — genuine tailwinds.

• Margins: Dhoot’s EBITDA margin of 17.15% in FY2025 is significantly higher than MSWIL (12.01%), Minda Corp (11.37%), and Uno Minda (11.17%). Sona BLW’s 27.40% margin reflects a completely different product mix (precision gears and EV traction motors) and is not directly comparable. Dhoot’s margin advantage comes from its focus on the 2W/3W segment, where harnesses are simpler but scale and backward integration deliver good profitability. However, that margin is under pressure — it has fallen from 18.31% in FY2024 and 16.38% in the stub — while peers’ margins have been more stable.

• Returns: Dhoot’s RoNW of 36.18% is far above Minda Corp (11.60%), Uno Minda (17.70%), and Sona BLW (17.70%). Dhoot is comparable to MSWIL’s 35.68%. But Dhoot’s high return is partly a function of leverage: net debt to EBITDA was 1.29x in FY2025 and rose to 1.51x in the stub. Post-IPO, debt repayment will reduce leverage and could lower RoE, all else equal.

• Cash conversion: This is where Dhoot diverges sharply from healthier peers. While peer cash-flow data is not in the DRHP comparison table, Dhoot’s own numbers show negative free cash flow in FY2024 and FY2025, funded by rising debt. Receivable days have stretched to 64 — a level that would raise questions at any auto-component supplier. MSWIL and Minda Corp, with their larger scale and more diversified customer bases, typically exhibit more stable working-capital cycles.

• Customer concentration: Dhoot’s top five customers account for 72.49% of revenue, with Bajaj Auto alone at 32.33%. This is an idiosyncratic risk — it is not shared to the same degree by MSWIL (which serves multiple PV OEMs) or Uno Minda (which has a broad aftermarket presence). Minda Corporation also has some concentration in 2W/3W but is more diversified across segments. Loss of a single OEM program would hurt Dhoot far more than it would hurt any of these peers.

• Governance: The audit-trail deficiency and the scale of related-party transactions are specific to Dhoot. None of the listed peers have a comparable flag in their recent filings.

Overall: Dhoot’s superior margins and returns are real but fragile — they depend on a concentrated customer base, a specific segment (2W/3W wiring harnesses), and an EV leadership position that larger competitors may contest as the market grows. The cash-flow strain and governance flags are idiosyncratic weaknesses. A discount to the peer average P/E is justified.

Dhoot has a narrow but real moat within its niche. It holds a top-two position in 2W and 3W wiring harnesses in India, with a 44.64% market share, and a dominant >70% share in the EV 2W and 3W segment. Backward integration into terminals, connectors and cables gives it cost and supply-chain advantages that smaller competitors cannot easily replicate. OEM relationships are sticky: the average top-five customer relationship is 13 years, and the PPAP approval process creates a 12–18 month barrier to switching. However, the moat is not wide. There are no long-term contracts or exclusivity agreements. Larger competitors like MSWIL have the capital and global scale to enter the 2W/3W segment if they choose. The moat is durable as long as Dhoot maintains its engineering lead and customer relationships, but it is tied to a cyclical Indian automotive market and a small set of OEMs.

Customer concentration (idiosyncratic, rising): The top five customers account for 72.49% of revenue, and Bajaj Auto alone is 32.33%. There are no minimum purchase commitments. Loss of any top customer would materially impair revenue and profit. This concentration has increased over the period — from 64.67% in FY2023 to 72.49% in the stub — meaning the company is growing more dependent, not less.

Receivable and cash-flow strain (idiosyncratic, worsening): Receivable days have stretched from 46 to 64 over two years. Free cash flow was negative in FY2024 and FY2025. The company is funding growth through debt and equity, not internal cash generation. If the working-capital cycle does not improve, the business will need continuous external capital.

Raw material volatility (industry-wide, manageable): Copper can account for over 50% of the bill of materials. The company seeks to pass through increases, but pass-through is subject to negotiation and can lag. Raw-material cost as a percentage of revenue has already risen from 64.50% in FY2024 to 65.25% in the stub.

Opaque group structure (idiosyncratic): Over half of consolidated profit comes from entities with limited disclosure. The UK subsidiary’s revenue jumped 3.5x in the stub with no explanation. Large common-control adjustments obscure true equity growth. Investors cannot fully assess the quality of a significant portion of group earnings.

The investment case for Dhoot Transmission rests on three factual strengths:
1. Market leadership: It is the dominant player in 2W and 3W wiring harnesses in India, with a 44.64% overall market share and a commanding >70% share in the fast-growing EV segment.
2. Revenue growth: Revenue grew at 23.1% in FY2025, driven by genuine tailwinds — electrification, rising content per vehicle, and premiumization.
3. Historical profitability: RoNW of 36.18% and an EBITDA margin of 17.15% in FY2025 are well above most listed auto-component peers.
Against these, three facts weigh heavily:

1. Negative free cash flow and deteriorating earnings quality. Free cash flow was negative in FY2024 (−₹31.3 crore) and worsened in FY2025 (−₹64.7 crore). The business is not converting growing profits into cash. Working-capital absorption — led by ballooning receivables (days stretched from 46 in FY2023 to 64 in FY2025) — has consumed 62% of FY2024 PAT and 46% of FY2025 PAT. Reported earnings are also flattered by one-off gains: non-recurring other income of ₹24.45 crore in FY2025 (pre-tax) inflated PAT by an estimated 5%. Adjusted for these, normalised EPS would be approximately ₹23.05, modestly below the reported ₹24.31.
2. Customer concentration is extreme and rising. The top five customers account for 72.5% of revenue, up from 64.7% in FY2023. Bajaj Auto alone is 32.3%. There are no long-term volume commitments. Loss of any top customer would be immediately material.
3. Governance and transparency concerns. The statutory auditor flagged a material weakness: the audit trail feature did not operate throughout FY2025, undermining confidence in the integrity of the books. Large related-party transactions — notably the ₹955 crore acquisition of Dhoot Holdings from the promoters, with ₹239 crore still unpaid — raise questions about capital allocation. The group structure is opaque: over half of consolidated profit is generated through entities where disclosure is limited.

What the thesis requires
For the investment case to work, Dhoot must (a) maintain its >70% EV market share as larger competitors enter the segment, (b) reverse the working-capital drain and return to positive free cash flow, (c) remediate the audit-trail deficiency, and (d) justify its valuation with genuinely recurring earnings — not one-off gains.