Zetwerk Manufacturing Business IPO (15-19 Oct) Analysis

2 days ago

8 min read

Zetwerk Manufacturing Businesses Limited, widely known as Zetwerk, describes itself as a technology led, asset light manufacturing platform driving production of industrial goods, both in India and globally.

The company aggregates manufacturing capacity across a network of third party suppliers and its own facilities into what it calls a universal factory, unified through its proprietary technology backbone, Zetwerk OS.

Its customers range from innovative startups to mature companies across industries including utilities, renewables, consumer electronics, artificial intelligence infrastructure, aerospace, space and defence, oil and gas, and industrial automation.

The company operates manufacturing facilities in India, Spain, the United States and Germany, and its Manufacturing Business is organised into Energy Products, Precision Products and Capital Goods categories.

The RHP states that there are no listed companies in India or globally operating a similar business model, reflecting the relatively novel, asset light manufacturing platform approach the company has pursued since starting operations in 2018.

During the periods covered by this RHP, the company made a strategic decision to discontinue its Civil Infrastructure Works business, under which it undertook construction and other civil infrastructure projects.

This discontinued business has materially affected the company's reported results, as discussed further in the Financial Performance section below.

Key Basics

This Offer comprises a Fresh Issue of Equity Shares aggregating up to Rs.2,830.00 Crore (Rs.28,300.00 million) by the company, and an Offer for Sale of up to 14,45,25,036 Equity Shares by a large group of Selling Shareholders, including the Promoters, a Promoter Group entity, and several venture capital and private equity investors such as Peak XV Partners, Lightspeed Venture Partners, Accel and Kae Capital.

Particulars	Details	Particulars	Details
Issue Type	Fresh Issue + Offer for Sale	Face Value	Rs.1 per Equity Share
Fresh Issue	Up to Rs.2,830.00 Crore	Offer for Sale	Up to 14,45,25,036 Equity Shares
Price Band	[TBD]	Lot Size	[TBD]
Bid or Offer Opens	[TBD]	Bid or Offer Closes	[TBD]
Listing At	BSE and NSE	RHP Date	October 11, 2026

The disclosed weighted average cost of acquisition for recent primary issuances is Rs.172.77 per Equity Share. Net Asset Value per Equity Share stood at Rs.31.26 as at March 31, 2026, declining to Rs.25.85 as at June 30, 2026, reflecting the impact of continued losses on the company's net worth over the stub period.

Separately, 1.85% of the pre Offer Equity Share capital held by the Promoters and 4.80% held by certain Promoter Group entities had been pledged with a security trustee under promoter borrowing arrangements, though the RHP discloses that the shares being offered for sale by the Promoters and the Promoter Group entity Creovate Innovation Private Limited have since been released from this pledge.

How Will the IPO Money Be Used?

Object	Estimated Amount (Rs. Lakhs)
Repayment or prepayment of borrowings of the company	1,30,000.0
Repayment or prepayment of borrowings of certain subsidiaries (Sharp Tanks and Structurals, Terra91 International, Smile Electronics, Kryfs Power Components, Kryfs Transformers, Unimacts Global LLC, Zetwerk Manufacturing SG, Zap91 Solar India and Zet Town India)	86,000.0
Inorganic growth through unidentified acquisitions and General Corporate Purposes (capped at 35% of Gross Proceeds combined, 25% individually)	[TBD]

A substantial majority of the identified Net Proceeds is earmarked for debt repayment across the company and nine named subsidiaries, which should reduce finance costs going forward.

A meaningful share is also earmarked for unidentified future acquisitions, which the RHP itself flags as carrying inherent uncertainty since no specific targets have been identified. The Offer for Sale proceeds will not be available to the company and will go entirely to the Selling Shareholders.

Financial Performance

Revenue, EBITDA and Profitability

The table below sets out Zetwerk's restated consolidated financial performance for the three Fiscals ended March 31, 2026, converted from Rs. Millions to Rs. Lakhs. Figures are from continuing operations unless stated otherwise.

Particulars (Rs. Lakhs)	FY2026	FY2025	FY2024
Revenue from Operations	15,91,332.3	11,33,185.6	12,36,437.2
Adjusted EBITDA	42,133.5	32,258.8	9,702.5
Adjusted EBITDA Margin	2.65%	2.85%	0.78%
Restated Loss before Exceptional Items and Tax (Continuing Operations)	(8,060.4)	(12,100.2)	(42,663.2)
Restated Loss for the Year (Total, incl. Discontinued Operations)	(1,60,617.1)	(37,070.8)	(91,794.9)
Net Asset Value per Share (Rs.)	31.26	NA	NA

Zetwerk has reported a net loss in each of the last three Fiscals, and this is the single most important fact for prospective investors to understand before anything else in this article. However, the composition of these losses matters.

On a continuing operations basis before exceptional items and tax, the loss has narrowed sharply, from Rs.42,663.2 Lakhs in FY2024 to Rs.8,060.4 Lakhs in FY2026, even as revenue from operations grew 40.43% year on year in FY2026 after declining 8.35% in FY2025.

Adjusted EBITDA has also turned positive and improved each year, reaching Rs.42,133.5 Lakhs in FY2026 at a 2.65% margin, a thin margin typical of an asset light, pass through heavy manufacturing platform model.

The much larger total reported losses, of Rs.1,60,617.1 Lakhs in FY2026 and Rs.91,794.9 Lakhs in FY2024, are driven by two specific items rather than core operating performance. First, exceptional items in FY2026 of Rs.83,583.9 Lakhs from continuing operations, which the company states primarily relate to a non cash charge arising from adjustments to the conversion ratio of various classes of shares held by shareholders, a pre IPO capital structure item rather than a cash operating cost.

Second, the company's decision to discontinue its Civil Infrastructure Works business resulted in discontinued operations losses of Rs.64,177.8 Lakhs in FY2026 and Rs.6,541.8 Lakhs in FY2024, including an impairment charge of Rs.45,300.0 Lakhs in FY2026 reflecting the expected realisable value of that business being lower than its net asset value.

Investors should read the core, continuing, pre exceptional trend as the better indicator of the underlying manufacturing platform's trajectory, while treating the total reported loss figures as including substantial one time and non cash items.

Balance Sheet and Cash Flow

Particulars (Rs. Lakhs)	FY2026	FY2025	FY2024
Total Assets	13,38,462.7	10,35,543.0	10,33,085.0
Total Equity (Net Worth)	4,81,372.2	4,45,376.4	4,06,246.2
Trade Receivables (Current)	2,32,992.8	1,75,282.9	2,11,157.6
Goodwill	1,05,402.2	34,561.2	27,783.7
Net Cash from (Used in) Operating Activities	(68,152.9)	(38,628.5)	(28,154.0)

Net cash flow from operating activities was negative in each of the last three Fiscals, driven primarily by working capital movements, including swings in trade payables, acceptances, inventories and receivables that are typical of a fast growing, asset light platform business that must fund supplier payments ahead of customer collections in some periods.

The company held a total closing cash balance, including investments and fixed deposits, of Rs.3,33,879.3 Lakhs at the end of FY2026, which provides a meaningful liquidity buffer against this negative operating cash flow trend, though continued negative operating cash flow would erode this buffer over time absent a change in working capital dynamics.

Goodwill has grown substantially, from Rs.27,783.7 Lakhs in FY2024 to Rs.1,05,402.2 Lakhs in FY2026, reflecting the company's active acquisition strategy, which also creates future impairment risk.

How Does It Compare to Peers?

The RHP states plainly that there are no listed companies in India or globally that operate in a similar asset light manufacturing platform business model, and accordingly no industry peer comparison in terms of P/E, RoNW or other standard accounting ratios has been presented.

Investors should therefore evaluate the Return on Net Worth and Net Asset Value figures disclosed in the Financial Performance section above on a standalone basis, since Return on Net Worth itself is presently negative given the company's reported losses, and no benchmark against comparable listed businesses is available in the RHP.

Key Risks

● Reported net losses in every period presented. The company incurred restated losses of Rs.1,60,617.1 Lakhs in FY2026, Rs.37,070.8 Lakhs in FY2025 and Rs.91,794.9 Lakhs in FY2024, and the RHP itself cautions that there is no assurance the company or its subsidiaries will not continue to incur losses in the future. While a large share of these losses relates to a non cash share conversion charge and the discontinued Civil Infrastructure Works business, the company's continuing, pre exceptional operations were also loss making in each of the three Fiscals, albeit by a narrowing margin.

● Negative operating cash flow in every period presented. The company used Rs.68,152.9 Lakhs of cash in operating activities in FY2026, Rs.38,628.5 Lakhs in FY2025 and Rs.28,154.0 Lakhs in FY2024, funded to date through financing activities and a substantial cash buffer, and the RHP flags that persistence of this trend could impair the company's ability to finance working capital and capital expenditure.

● Discontinuation and impairment of the Civil Infrastructure Works business, which generated a discontinued operations loss of Rs.64,177.8 Lakhs in FY2026, including a Rs.45,300.0 Lakhs impairment charge, as the company determined the realisable value of that business was lower than its net asset value, reflecting a significant capital allocation misstep that has now been unwound.

● Thin profitability margins inherent to the business model. Adjusted EBITDA margin was 2.65% in FY2026, improving from 0.78% in FY2024 but still thin in absolute terms, meaning relatively small changes in gross margin, supplier costs or customer mix could have an outsized effect on reported profitability.

● Large unidentified acquisition component in use of proceeds, with a meaningful share of the Fresh Issue earmarked for inorganic growth through acquisitions that have not yet been identified, capped at 35% of Gross Proceeds in aggregate, creating execution and integration uncertainty.

● Customer concentration, with the top 10 customers contributing 35.90% of revenue from operations in FY2026, up from 22.37% in FY2024, moving in the direction of higher concentration even as the absolute business has scaled.

● Statutory Auditors have included certain emphasis of matters and modifications in their reports, including around the special purpose financial statements prepared for this Offer and a scheme of amalgamation among subsidiaries, which investors may wish to review in full in the RHP's financial statements section.

● A portion of the Promoters' and a Promoter Group entity's Equity Shares had been pledged under promoter borrowing arrangements prior to this RHP, and while the shares offered in the Offer for Sale have since been released from pledge, the RHP notes there is no assurance against future pledging of shares by shareholders.

● The company has in the past failed to file certain forms with the RBI for certain share allotments within prescribed timelines, and separately disclosed a discrepancy in corporate filings relating to the allotment of Series D CCPS.

● The company has issued Equity Shares during the preceding twelve months at a price that may be lower than the eventual Offer Price, meaning some existing shareholders hold shares acquired at a lower cost than investors subscribing in this Offer.

Positives to Note

● Narrowing core operating losses and improving profitability trajectory, with continuing operations loss before exceptional items and tax shrinking from Rs.42,663.2 Lakhs in FY2024 to Rs.8,060.4 Lakhs in FY2026, alongside Adjusted EBITDA turning solidly positive and improving each year.

● Strong revenue growth resuming in FY2026, up 40.43% year on year after a decline in FY2025, with the Manufacturing Business segment revenue growing 50.02% in FY2026 and the Manufacturing Order Book growing to Rs.12,37,000.9 Lakhs as at FY2026 end from Rs.6,16,974.6 Lakhs at FY2024 end.

● Backed by a deep bench of institutional and venture capital investors, including Peak XV Partners (formerly Sequoia Capital India), Lightspeed Venture Partners and Accel, several of whom are only partially monetising their holdings through this Offer for Sale rather than exiting entirely.

● A substantial cash and investment buffer of Rs.3,33,879.3 Lakhs at the end of FY2026, which provides meaningful runway against the company's current negative operating cash flow while it continues to scale toward sustained profitability.

● Diversified, technology enabled manufacturing platform spanning multiple product categories, geographies and customer industries, including exposure to structurally growing end markets such as renewables, artificial intelligence infrastructure and aerospace and defence.