Investing in the future of railway safety: Company behind KAVACH project launches IPO – should you invest?
In this analysis, we take a closer look at Quadrant Future Tek Ltd and present you with the exclusive IPO details.
About the issue
Quadrant Future Tek Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details.
| IPO Details |
| IPO Opening Date |
January 07, 2025 |
| IPO Closing Date |
January 09, 2025 |
| Issue Type |
Book Built Issue IPO |
| Face Value |
Rs 10 per equity share |
| IPO Price |
Rs 275 to Rs 290 per equity share |
| Min Order Quantity |
50 shares |
| Listing At |
BSE, NSE |
| Total Issue |
1,00,00,000 shares of FV Rs 10* |
| (Aggregating up to Rs 290 Cr)* |
| Fresh Issue |
1,00,00,000 shares of FV Rs 10* |
| (Aggregating up to Rs 290 Cr)* |
| QIB Shares Offered |
75% of the Offer |
| Retail Shares Offered |
10% of the Offer |
| NII (HNI) Shares Offered |
15% of the Offer |
| *At Upper Price Band |
|
Objects of the Issue
Since the offer is exclusively a fresh issue, it is noteworthy that the company will use the proceeds for its growth and expansion plans, rather than the funds flowing to promoters.
The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:
1. Funding long-term working capital requirements of the company.
2. Capital expenditure for the development of an Electronic Interlocking System.
3. Prepayment or repayment of all or a portion of outstanding working capital term loan availed by the company.
4. General corporate purposes.
Promoter holding
Mohit Vohra, Amit Dhawan, Amrit Singh Randhawa, Rupinder Singh, Vishesh Abrol, Vivek Abrol, Aikjot Singh and Rajbir Singh Randhawa are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 93.33 per cent in the company.
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Company profile
The company is a research-driven organization specializing in the development of next-generation Train Control and Signalling Systems under the Indian Railways' KAVACH project. Designed to provide the highest levels of safety and reliability for rail passengers, KAVACH is poised to become the world’s most cost-effective automatic train collision protection system, safeguarding both human lives and rail infrastructure once fully implemented by Indian Railways.
In addition to its expertise in signalling systems, the company operates a state-of-the-art speciality cable manufacturing facility equipped with an Electron Beam Irradiation Centre. These cables are widely used in railway rolling stock and the naval defence industry. The facility also has comprehensive capabilities for producing solar and EV cables.
The company’s sole manufacturing facility, located in Village Basma, Tehsil Banur, District Mohali, serves as a hub for manufacturing, testing, research, and development. It supports the production of specialty cables and hardware for its Train Control and Signalling Division, ensuring a seamless and integrated production process.
Financials
| Rs (in crore) |
FY22 |
FY23 |
FY24 |
H1FY25 |
| Revenue |
104.29 |
152.95 |
151.82 |
65.14 |
| Profit Before Tax |
2.95 |
19.93 |
21.92 |
-12.5 |
| Net Profit |
1.94 |
13.9 |
14.71 |
-12.11 |
After showcasing significant growth in FY23 over FY22, the company’s topline and bottom-line performance plateaued in FY24. Furthermore, annualized H1FY25 results indicate an estimated 14 per cent decline in revenue as compared to FY24.
To offset the losses incurred in H1FY25 and achieve meaningful growth over FY24 levels, the company will require robust profit figures in the latter half of the year. However, uncertainties continue to pose challenges.
Valuation & Returns
| Company Name |
P/E |
P/B |
RoE (%)* |
| Quadrant Future Tek Ltd |
- |
20 |
33 |
| Listed Peers |
| Kernex Microsystems (India) Ltd |
- |
20 |
- |
| HBL Engineering Ltd |
53 |
13 |
26 |
| Apar Industries Ltd |
50 |
10 |
27 |
| Polycab India Ltd |
62 |
13 |
24 |
*RoE: Based on FY24 data
The issue is priced with a P/BV ratio of 25.46 times, calculated using its Net Asset Value (NAV) of Rs 11.39 as of September 30, 2024. At the upper price cap, it is priced at a P/BV ratio of around 20 times, considering its post-IPO NAV.
Based on the company's annualized FY25 earnings and fully diluted equity capital, the price-to-earnings (P/E) ratio is negative due to the losses incurred in H1FY25. Even when factoring in the FY24 earnings, the P/E ratio stands at 59x, which remains relatively high compared to its listed peers.
Despite delivering a strong return on equity (RoE) of 33 per cent and a return on capital employed (RoCE) of 26 per cent for FY24, the company's competitive edge is undermined by losses in H1FY25 and its overvaluation, even when based on FY24 figures.
Outlook
The company stands to benefit from opportunities like the Indian Railways’ KAVACH project, the global transition toward efficient and eco-friendly transport solutions, and its MoU with RailTel, which could facilitate international market expansion.
However, significant risks persist. Indian Railways accounts for approximately 50 per cent of the company’s revenue, while 75-80 per cent of revenue is concentrated among its top five customers, highlighting substantial concentration risks.
Additionally, a high dependency on suppliers—with 85 per cent of supplies sourced from the top five suppliers—poses operational vulnerabilities. The reliance on a single manufacturing facility amplifies the risk of severe production disruptions. Furthermore, ongoing criminal cases against promoter directors could damage the company’s reputation.
Considering these risks, coupled with uncertainties around future growth and valuation concerns, we recommend investors avoid the issue.