Danish Power IPO Review: Should You Apply?

Danish Power Ltd., a leading player in the transformer manufacturing industry, is all set to launch its IPO from October 22, 2024, to October 24, 2024. The company, which serves the renewable energy and industrial sectors, is offering a total issue size of ₹197.90 crore through its public offering. In this detailed review, we’ll examine the company’s business model, financial performance, risks, and potential, helping you decide whether you should apply for this IPO.

Danish Power IPO Details

Also Read: Waaree Energies IPO Review: Should Apply or Not?

Business Overview

Founded in 1985, Danish Power Ltd. is a manufacturer of transformers and control relay panels, serving key sectors like renewable energy, industrial projects, and public utilities. The company specializes in:

• Inverter duty transformers (up to 20 MVA, 33 kV class for solar plants).
• Distribution transformers (up to 5 MVA, 33 kV class).
• Power transformers (up to 63 MVA, 132 kV class).
• Control relay panels (up to 400 kV class), including substation automation systems (SCADA), busbar protection panels, and automatic power factor control panels.

Danish Power’s clients include notable companies such as Tata Power Solar, Waaree Renewable Technologies, and ABB India. The company operates two state-of-the-art manufacturing facilities with a combined capacity of 4,681 MVA for transformers and the ability to produce 576 control relay panels annually.

Strengths of Danish Power

1. Certified Excellence: Danish Power is ISO certified for quality (ISO 9001:2015), environmental management (ISO 14001:2015), and occupational health and safety (ISO 45001:2018), highlighting its commitment to high standards in manufacturing.
2. Established Clientele: The company has secured strong relationships with major players in the energy sector, including Tata Power, Jakson Green, and Torrent Power, which enhances its market reputation.
3. Manufacturing Capabilities: Danish Power’s facilities are equipped with advanced machinery, including winding machines, oil storage tanks, and busbar processing machines. Their NABL-accredited testing facility ensures that their products meet stringent quality standards.
4. Revenue Growth: The company has shown consistent growth, with revenue from operations increasing from ₹148.63 crore in FY22 to ₹332.48 crore in FY24.

Also See: IPO GMP

Financial Performance

Danish Power has demonstrated steady financial growth over the years, which is evident from its rising revenue and profits.

The company’s PAT margin stands at a strong 14.58% for FY24, showcasing its profitability. However, it’s worth noting that the significant increase in profits after FY24 may raise some questions regarding sustainability.

Key Performance Indicators (KPI) as of June 30, 2024

These strong KPIs reflect Danish Power’s ability to manage its operations efficiently, even with some debt on its balance sheet.

Also See: Subscription

Risks

1. Customer Concentration: Danish Power’s revenue is heavily dependent on a few key customers. In FY24, the top 10 customers contributed 88.04% of its revenue. Losing any of these customers could significantly impact the company’s financial performance.
2. Raw Material Dependency: The company relies on a limited number of suppliers for raw materials. Any disruptions in the supply chain could affect production and profitability.
3. Niche Market Focus: Danish Power operates in a niche market, primarily serving large industries and renewable energy projects. Any downturn in these sectors could hurt the company’s revenue.
4. Legal Proceedings: The company is involved in certain legal cases. Adverse rulings could negatively affect its business and financial outlook.
5. Indebtedness: As of March 31, 2024, Danish Power’s total debt stood at ₹10.11 crore. Any inability to service or repay these loans could pose a financial risk.
6. Technological Risks: The transformer industry is subject to technological advancements. Any innovations that outpace Danish Power’s current product line could diminish its market share.
7. Contingent Liabilities: The company has reported contingent liabilities amounting to ₹52.37 crore. If these liabilities materialize, they could significantly impact Danish Power’s financial health.

Objects of the Issue

The net proceeds from the IPO will be used for the following purposes:

1. Expansion of manufacturing facility: Funding capital expenditure towards building a factory shed and installing additional machinery.
2. Working capital requirements: To meet the company’s growing operational needs.
3. Repayment of borrowings: Partial or full repayment of specific loans.
4. General corporate purposes: Including operational expansion and growth initiatives.

Danish Power IPO Lot Size and Investment

Promoter Holding

The promoters, Dinesh Talwar, Shivam Talwar, and Puneet Sandhu Talwar, will continue to hold a significant portion of the company after the IPO.

Should You Apply for the Danish Power IPO?

Danish Power’s robust financial performance, long-standing presence in the industry, and solid relationships with big clients make it an attractive investment option. The company’s focus on renewable energy and industrial solutions positions it well for future growth, especially in sectors that are expected to expand rapidly.

However, investors should be mindful of the risks, particularly its dependence on a limited number of clients and suppliers, as well as the potential impact of legal proceedings and contingent liabilities.

For investors with a medium to long-term investment horizon, Danish Power could offer substantial returns, especially given its market position in renewable energy and infrastructure development. Dilip Davda recommends that well-informed investors may apply for this IPO, particularly those looking for growth in the renewable energy sector.

Final Verdict: Apply for the Long Term

Danish Power IPO Registrar

• Registrar: Link Intime India Private Ltd
• Phone: +91-22-4918 6270
• Email: danishpower.smeipo@linkintime.co.in
• Website: Link Intime Public Issues

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