Vikran Engineering IPO Analysis by Parimal Paritosh

Vikran Engineering Limited is an Indian EPC company that designs and executes turnkey projects across power transmission and distribution, water infrastructure, and select railway works, handling everything from design and procurement to installation, testing, and commissioning for government, PSU and private clients. The company has grown its operations and order book across multiple states with an asset‑light approach and works through a mix of in‑house capabilities and sub‑contracting to deliver projects efficiently.

The company is coming out with an IPO. Vikran Engineering’s IPO aggregates up to ₹772.0cr.

Business Model of the company

Vikran Engineering Limited works in three main areas: power lines and substations, clean water systems, and rail-related infrastructure, which together cover how electricity moves, how water is supplied and treated, and some supporting rail projects.

Power transmission and distribution

• This is about moving electricity from big power plants to homes and businesses using high‑voltage lines and substations, like highways and “exits” for electricity. The company builds and upgrades transmission lines (such as 132 kV to 400 kV) and substations that safely step voltage up or down so power can travel long distances and then be used locally.
• Think of it like building and maintaining the main roads and intersections of the electric grid so lights, phones, and factories always have power; this is the company’s largest vertical by both order book and recent revenue.

Water infrastructure

• This covers systems that bring safe water to people and farms: laying big pipelines, building water treatment plants (to clean river/ground water), and constructing storage tanks/reservoirs so water is available when needed.
• Picture giant filters and long pipes that make sure clean water reaches neighborhoods and fields; the company handles design, supply, installation, and testing on turnkey (end‑to‑end) projects.

Railways and related infrastructure

• Here the work supports railway power and facilities, like special transmission lines and substation bays that feed electricity to railway traction systems, plus certain station or line extensions.
• Imagine making sure electrified trains have a reliable “power lifeline” along their routes; this is a smaller slice of the business today compared to power and water.

How projects are delivered

• The company is an EPC contractor, which means it handles Engineering (design), Procurement (buying the right equipment and materials), and Construction (building and testing), then hands over a ready‑to‑run system to the client. It often works for government bodies, public sector utilities, and private companies.
• On many jobs it’s turnkey: from concept to commissioning, the company is responsible for making the whole system work safely and on time.

Litigations

• Railway ban dispute: A railway vigilance unit said the company should be banned for two years over alleged bribery linked to a past railway electrification project; the Delhi High Court has put that ban on hold while it reviews the case, so the ban is not in force right now. A hearing is scheduled, and the final decision is pending.
• CBI charge sheet: There is a criminal case filed by the Central Bureau of Investigation related to an alleged bribe involving a railway officer and certain company employees during a railway contract. The court has not even framed formal charges yet, so it’s still early and no guilt has been decided.
• Big customer dispute (RSDCL): A state solar park agency ended a project early, cashed bank guarantees, and the company is suing to recover money it says it’s owed because delays weren’t its fault. This is a civil, money-related fight, and it’s still in court.
• Old tax/GST demands: The company is contesting earlier tax and GST demands and says it has legal advice that it shouldn’t have to pay; these are regulatory disputes that could end with payments or could be dropped, depending on the final rulings.
• Receivables at risk: One big receivable (money owed) of about ₹293 million is tied to the RSDCL dispute; auditors highlighted it as an “emphasis of matter,” meaning investors should notice it, but the company still expects to collect it.

Final Verdict

You could apply, but purely for listing gains (listing gain if any, would not be very significant). There are a lot of potential red flags in the company:

• Order book slowdown and visibility: Value of projects awarded fell to ₹7,009m in FY25 from ₹21,712m in FY23; order book-to-revenue declined from 390% (FY23) to 223% (FY25), reducing forward visibility, especially in water and rail verticals.
• Working-capital intensity and cash flow stress: Negative operating cash flow in FY24/FY25 (₹665m/₹1,291m), high receivables and contract assets (trade receivables ₹6,343m; 12.19% outstanding >6 months), and rising borrowings, pointing to cash conversion risk despite PAT growth.
• Litigation/ban overhang with Railways: Railway Board order (July 26, 2024) recommending two-year ban (stayed by Delhi High Court; next hearing Sept 26, 2025) plus a CBI chargesheet case related to alleged bribery in a RE/Ahmedabad project; adverse outcomes could hit bidding eligibility and reputation.
• Government exposure concentration: FY25 revenue mix ~62% government, ~18% PSU, ~20% private; delays in tenders, payments, or policy shifts can impact execution, scope, and working capital cycles.
• Project execution margin risks: Fixed-price exposure (up to ~49% of order book in earlier years; 35–49% range) and input-cost volatility (steel/cement/fuel/labour) can cause overruns not fully recoverable under escalation clauses, compressing margins.
• Bank guarantee and contingent claim risk: High BG usage (₹2,630m issued in FY25) with one invocation in FY24 (₹153m) tied to the RSDCL dispute; contingent tax/GST claims totaling ~₹640m may crystallize.
• Leverage and covenants: Total borrowings climbed (₹2,729m FY25); DSCR below 1 for three fiscals (A DSCR (Debt-Service Coverage Ratio) below 1 means a company’s or individual’s operating income is not enough to cover its debt obligations) and covenants/personal guarantees by promoters increase financing risk under stress.

So personally, my verdict would be to avoid this IPO.