Prostarm Info Systems IPO: Opportunity or Overhype? Full Analysis Here

The Rs 168 crore IPO opens for subscription from May 27 to May 29, with allotment likely on May 30 and listing expected on June 3 on BSE and NSE

Prostarm Info Systems Ltd is set to raise Rs 168 crore through a 100 per cent fresh issue of 1.60 crore equity shares. The IPO will open on May 27, 2025, and close on May 29, 2025. Allotment is expected on May 30, and listing is likely on June 3 on both BSE and NSE.

The price band is fixed at Rs 95–Rs 105 per share. Retail investors can apply for a minimum of 142 shares, amounting to an investment of Rs 13,490–Rs 14,910. For non-institutional investors, the minimum application size is 14 lots (Rs 2.09 crore) for sNII and 68 lots (~Rs 10.14 crore) for bNII.

The issue represents 27.18 per cent of Prostarm’s post-issue equity. Post-IPO, paid-up capital will rise from Rs 42.88 crore to Rs 58.88 crore, implying a market cap of Rs 618.18 crore at the upper price band. Choice Capital Advisors Pvt Ltd is the sole Book Running Lead Manager, KFin Technologies Ltd is the registrar, and Choice Equity Broking Pvt Ltd is part of the syndicate.

See the issue details below.

Objects of the Issue

To utilise the Net Proceeds from the Issue towards the following objects:

• Funding working capital requirements of the company - Rs 72.5 crore
• Prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company - Rs 17.95 crore
• Achieving inorganic growth through unidentified acquisitions and other strategic initiatives and general corporate purposes

Promoter

Promoted by Ram Agarwal, Sonu Ram Agarwal, and Vikas Shyamsunder Agarwal, the promoter shareholding will dilute from 100 per cent to 72.82 per cent post-issue.

Company Profile

Incorporated in 2008, Prostarm Info Systems Ltd operates in the energy storage and power conditioning segment. It manufactures and services products such as UPS systems, lithium-ion battery packs, solar hybrid inverters, and stabilizers under the "Prostarm" brand. The company also provides third-party product sales, reverse logistics, and EPC rooftop solar services. It caters to sectors like healthcare, BFSI, defence, IT, aviation, and education, with key clients including the Airports Authority of India, Railtel, CPWD, and NTPC Vidyut Vyapar Nigam. It has a strong nationwide footprint with 21 branches and 2 warehouses across 18 states and one Union Territory, employing 442 personnel as of March 2025.

Industry Outlook 

The industry backdrop remains favourable. India’s power backup and energy storage markets are expanding rapidly, driven by industrialization, frequent power disruptions, and the shift toward renewable energy. The UPS market stood at Rs 964.32 crore in FY24 and is projected to grow at a CAGR of 8.22 per cent by FY30. The lithium-ion battery market, valued at Rs 5,580.78 crore in FY24, is forecast to reach Rs 16,390.9 crore by FY30, at a CAGR of 19.67 per cent. Similarly, the solar hybrid inverter segment is set to grow from Rs 52.42 crore in FY24 to Rs 139.38 crore by FY30, with a CAGR of 18.6 per cent.

Financials 

(Source – Company’s RHP)

(Source – Company’s RHP)

(Source – Company’s RHP)

Key ratios

 (Source – Company’s RHP)

On the financial front, Prostarm has shown consistent growth. Revenue increased from Rs 171.31 crore in FY22 to Rs 257.87 crore in FY24, and further to Rs 268.63 crore in the first nine months of FY25. Net profit rose from Rs 10.87 crore in FY22 to Rs 22.80 crore in FY24, with Rs 22.11 crore already earned in the first nine months of FY25. EBITDA margins have remained steady, increasing from 9.67 per cent in FY22 to 14.2 per cent in FY24. The company maintains strong financial ratios, with return on equity at 32.09 per cent, return on capital employed at 32.41 per cent, and a manageable debt-equity ratio of 0.51 as of FY24. Net worth has risen from Rs 40.95 crore in FY22 to Rs 84.30 crore in FY24, reflecting healthy retained earnings and profitability.

Listed Peer Comparison 

 (Source – Company’s RHP)

Compared to peers like Servotech Renewable Power Systems and Sungarner Energies, Prostarm stands out with superior margins and returns. Its EBITDA margin of 14.2 per cent and return on equity of 32.12 per cent outperform both peers, despite a similar debt profile. These strengths reflect well on its operational efficiency, product mix, and customer diversity.

SWOT Analysis

Strengths:
Prostarm Info Systems Ltd is led by a team of seasoned promoters with over 16 years of experience in the power solutions space, bringing strategic clarity and strong execution capabilities. The company operates across a well-diversified set of end-use sectors such as healthcare, BFSI, aviation, education, and data centers, which helps mitigate sectoral risks and ensures a stable demand environment. Its strong and credible client base, including marquee private players and multiple government agencies, lends significant revenue visibility and enhances its market positioning.

Weaknesses:
Despite its operational strengths, Prostarm faces concentration risks, with the top five clients contributing nearly 60 per cent and the top ten making up about 72 per cent of total revenue in the first nine months of FY25. This over-reliance makes the business vulnerable to fluctuations in client demand or procurement policies. Additionally, the company’s dependence on third-party suppliers, distributors, and contract manufacturers exposes it to supply chain uncertainties. Its working capital-intensive business model, especially in government contracts that often require performance guarantees, adds financial pressure. This has led to a longer working capital cycle, which increased from 80 days in FY23 to 111 days in FY24, and has resulted in negative operating cash flows for three consecutive periods—FY23, FY24, and 9MFY25.

Opportunities:
Looking ahead, Prostarm plans to allocate up to 25 per cent of the IPO proceeds toward acquisitions, opening doors to inorganic growth and portfolio expansion. The company also has significant potential to build recurring, high-margin revenue streams by offering value-added services such as annual maintenance contracts (AMCs) and managed service offerings. These can deepen customer engagement and smooth out revenue volatility over time, enhancing both profitability and business stability.

Threats:
The company operates in a competitive landscape marked by the presence of multinational corporations and agile local players, exposing it to risks such as pricing pressure, declining margins, and market share erosion. Additionally, any compliance lapses or underperformance could lead to the loss of key government empanelments, severely affecting revenue. As Prostarm expands into new geographies, it may face regulatory, integration, and execution risks that could hamper operational efficiency. Moreover, a recent Show Cause Notice issued by the Directorate of Revenue Intelligence (DRI) for alleged customs duty violations adds a layer of regulatory and reputational risk.

Valuation and Outlook

Prostarm Info Systems share is being offered at an EV/EBITDA of 17.82x, which is at a discount to peers like Sungarner Energies (26.4x) and Servotech Renewable Power (49.3x). Despite the lower valuation, Prostarm delivers stronger operational and return ratios, including an EBITDA margin of 14.2 per cent, RONW of 32.12 per cent, and ROCE of 32.40 per cent, indicating efficient capital usage and profitability. The debt-equity ratio of 0.51 and DSCR of 5.59x further support its financial strength.

The company benefits from cross-selling opportunities across power backup and solar solutions, which enhances client stickiness and cost-effective customer acquisition. It has shown strong revenue and profit growth, with improved bottom-line performance post FY23 due to its integrated service offerings.

Despite a 15 per cent CAGR in revenue from FY22–FY24, trade receivables grew at a faster 37 per cent CAGR, signaling delayed realizations. Moreover, the inventory turnover has declined, and despite revenue growth, the company has reported negative operating cash flows, indicating working capital stress. These issues raise concerns over cash flow management in a highly competitive and fragmented market.

Although Rs 72.50 crore from the IPO proceeds is earmarked for working capital (FY26), which may help secure better supplier terms and discounts, the amount allocated towards inorganic growth (25 per cent of net proceeds) appears modest and may have limited impact.

While the management claims Prostarm is a preferred power solutions partner with a healthy order book, the gap between earnings growth and cash flow, and the increasing working capital cycle, warrant caution.

Given the valuation comfort and strong return metrics, the IPO may attract interest. However, considering cash flow concerns, high receivables, and working capital intensity, we recommend an 'Avoid' rating on Prostarm Info Systems IPO at this stage. Risk-taking investors with a long-term view may invest while closely monitoring the company’s execution, inorganic growth strategy, and cash flow improvements post-listing.