Oswal Pumps Ltd

One of the largest supplier of solar powered agricultural pumps under the PM Kusum Scheme, well positioned to capitalise on strong industry tailwinds.

Vertically integrated manufacturing competencies.

Strong engineering and design capabilities.

Comprehensive product portfolio in multiple product specifications.

Strong presence in major agricultural states in India including Haryana and growing presence in other states.

Extensive distribution network catering to a diversified customer base.

Experienced Promoter and senior management team.

The company derives a signification portion of its revenues from the supply of Turnkey Solar Pumping Systems which are awarded on a tender basis by state and central Government institutions under the PM Kusum Scheme (Rs. 7,732.07 million, Rs. 3,274.15 million, nil and nil from the supply of the Turnkey Solar Pumping Systems directly under the PM Kusum Scheme in the nine months ended December 31, 2024 and Fiscals 2024, 2023 and 2022, respectively, representing 78.50%, 44.77%, nil and nil of revenue from operations (excludes revenue from the sale of traded goods and other operating revenue and adding back discounts and incentives) during such periods). However, the company cannot assure you that the Government will continue this scheme or that its bids will be accepted and future contracts will be awarded to it. Any reduction in Government funding for this scheme or its inability to obtain contracts may have an adverse impact on its business, results of operations, financial condition and cash flows. Further, in the nine months ended December 31, 2024 and Fiscal 2024, 2023 and 2022, revenue from operations for its Material Subsidiary, Oswal Solar on a standalone basis, which is currently engaged in the manufacturing of solar modules and primarily supplying to the Company, was Rs. 2,812.83 million, Rs. 593.22 million, nil and nil, respectively.

Its business is dependent on the performance of the agricultural sector (Rs. 9,510.52 million, Rs. 7,024.71 million, Rs. 3,254.70 million and Rs. 2,964.21 million from the agricultural sector in the nine months ended December 31, 2024 and Fiscals 2024, 2023 and 2022, respectively, representing 96.55%, 96.06%, 90.84% and 87.03% of revenue from operations (excluding revenue from the sale of traded goods and other operating revenue and adding back discounts and incentives) during such periods). Any adverse changes in the conditions affecting the agricultural sector may adversely impact its business, results of operations, financial condition and cash flows. Further, in the nine months ended December 31, 2024 and Fiscal 2024, 2023 and 2022, revenue from operations for its Material Subsidiary, Oswal Solar on a standalone basis, which is currently engaged in the manufacturing of solar modules and primarily supplying to the Company, was Rs. 2,812.83 million, Rs. 593.22 million, nil and nil, respectively.

The company derives a significant portion of its revenues from the sale of the company products in the states of Haryana (34.75%, 72.28%, 44.00% and 49.60% in the nine months ended December 31, 2024 and Fiscal 2024, 2023 and 2022, respectively), Maharashtra (44.30%, 7.85%, 18.69% and 9.85% in the nine months ended December 31, 2024 and Fiscal 2024, 2023 and 2022, respectively), Uttar Pradesh (6.14%, 6.12%, 3.76% and 2.73% in the nine months ended December 31, 2024 and Fiscal 2024, 2023 and 2022, respectively) and Rajasthan (5.28%, 4.53%, 7.29% and 17.85% in the nine months ended December 31, 2024, Fiscal 2024, 2023 and 2022, respectively). Consequently, any adverse developments affecting its operations in such regions, could have an adverse impact on its business, results of operations, financial condition and cash flows.

Its business largely depends upon the company top 10 customers, which contributed 78.87%, 79.50%, 72.56% and 66.29% of its revenue from operations for the nine months ended December 31, 2024, Fiscals 2024, 2023 and 2022, respectively. The loss of any of these customers could have an adverse effect on its business, results of operations, financial condition and cash flows.

Its operations are supported by two manufacturing facilities which are situated at Karnal, Haryana. The Company`s facility is dedicated to the production of pumps and motors, while its Material Subsidiary, Oswal Solar`s facility is dedicated to manufacturing of solar modules. The geographical concentration of its manufacturing facilities exposes the company operations to potential risks arising from local and regional factors such as adverse social and political events, weather conditions and natural disasters in this region.

The company plan to increase its manufacturing capacity for solar modules. If such expansion does not lead to increases in its revenue from operations, it could have an adverse effect on its business, results of operations, financial condition and cash flows. Further, its proposed capacity expansion plan is subject to the risk of unanticipated delays in implementation and cost overruns. Further, the company has limited experience in the manufacturing of solar modules, and its may not be successful in this endeavour.

The company intend to utilise a portion of the Net Proceeds to purchase certain equipment and machinery for its manufacturing facility at Karnal, Haryana and for the company Material Subsidiary, Oswal Solar`s existing and new manufacturing facility at Karnal, Haryana which is subject to cost escalation and is also based on quotations that may be subject to change or may expire. The company is yet to place orders for the purchase of such equipment and machinery and the company cannot assure you that its will be able to place orders for such equipment and machinery, in a timely manner or at all. Further, given that the company does not have prior experience in the manufacturing of ethylene-vinyl acetate ("EVA"), the company cannot assure you that its proposed expansion in relation to EVA will be successful.

Its inability to meet the company obligations, including financial and other covenants under its debt financing arrangements could adversely affect its business, results of operations, financial condition and cash flows.

Its Subsidiaries Oswal Solar and Oswal Green have incurred losses in the past and may incur losses in the future which could have an adverse effect on its business and results of operations.

The number of Turnkey Solar Pumping Systems that the company is awarded by state and central government institutions are subject to receipt of interest from relevant beneficiaries and the actual number of Turnkey Solar Pumping Systems that the company eventually install may be lower than those awarded to it.

Its business is dependent on the company distribution network and any inability to expand or effectively manage its distribution network may have an adverse effect on its business, results of operations, financial condition and cash flows.

The company depends on a few suppliers for the supply of its raw materials and the company does not have definitive supply agreements with them. Interruptions in the supply of raw materials could adversely affect its ability to manufacture the company products and consequently its business and results.

Its failures to compete effectively in the highly competitive pump manufacturing industry could have an adverse effect on its business, results of operations, financial condition and cash flows.

An inability to maintain or enhance the popularity of its "Oswal" brand may adversely impact the company business, results of operations, financial condition and cash flows.

Its business requires working capital. Any failures in arranging adequate working capital for the company operations may adversely affect its business, results of operations, cash flows and financial condition.

The company is subject to counterparty credit risk and any delay in receiving payments or non-receipt of payments from its customers and distributors could have an adverse effect on its business, results of operations, financial condition and cash flows.

Its business and profitability is substantially dependent on the availability and cost of copper and solar cells which are required for manufacturing of pumps and solar modules, respectively, and any disruption to the timely and adequate supply of copper and solar cells, or volatility in the prices of copper and solar cells may adversely impact its business, results of operations, cash flows and financial condition. Further, the company has limited experience in procuring solar cells which are required for solar modules, and its inability to source quality solar cells at competitive prices may adversely impact the quality of its solar modules which may have an adverse impact on its business, results of operations, cash flows, financial condition and reputation.

The Company, Subsidiaries, Promoters and Directors are involved in certain legal and regulatory proceedings. Any adverse decision in such proceedings may have an adverse effect on its business, financial condition, cash flows and results of operations.

Its ability to access capital at attractive costs depends on the company credit ratings. Non-availability of credit ratings or a poor rating may restrict its access to capital and thereby adversely affect its business, financial conditions, cash flows and results of operations.

The company requires certain licenses, permits and approvals in the ordinary course of business, and the failures to obtain or retain them in a timely manner may materially adversely affect its operations.

The company has substantial capital expenditure and may requires additional capital and financing in the future and its operations could be affected if the company is unable to obtain the required additional capital and financing when needed.

There have been past instances of non-compliance, under the provisions of the Companies Act. There are also certain inadvertent discrepancies in statutory form filings submitted to the RoC. Any proceedings that may be initiated in this regard, or any adverse outcome of such proceedings, could adversely impact its reputation, business and the company results of operations.

Certain of its corporate records are not traceable. The company cannot assure you that regulatory proceedings or actions will not be initiated against it in the future and that the company will not be subject to any penalty imposed by the competent regulatory authority in this regard.

Unforeseen environmental costs could affect its future earnings as well as the affordability of its products and services.

The company intend to introduce new products in the industrial pumps and electric motors categories. If these product categories does not witness the demand that the company expect them to, its business, financial condition, results of operations and cash flows may be adversely affected.

There have been certain instances of delays in payment of statutory dues by it in the past. Any delay in payment of statutory dues by the company in future, may result in the imposition of penalties and in turn may have an adverse effect on its business, financial condition, results of operation and cash flows.

Its Material Subsidiary, Oswal Solar has a limited operating history and therefore is subject to various risks, which could have an impact on its business, results of operations, financial conditions and cash flows.

Its operating history may not be indicative of the company future growth or financial results and its may not be able to sustain its historical growth rates. The company revenue from operations increased by 97.01% from Rs. 3,850.36 million in Fiscal 2023 to Rs. 7,585.71 million in Fiscal 2024 and its revenue from operations was Rs. 10,656.71 million in the nine months ended December 31, 2024. Its future growth may be impacted by a variety of factors, including but not limited to, variations in raw materials, pricing, product mix, end consumer preferences, sales velocities, and competition. Further, while its restated profit has increased, however, its cash flow from operating activities has decreased, and its trade receivables and inventories have increased over the years and the company cannot assure you that its growth in profit may be sustainable if inventory or receivables growth persist at these levels.

The solar pump and solar module markets presents several challenges that could adversely affect business, results of operations, financial condition and cash flows.

There have been certain observations of the Company and its Subsidiaries` statutory auditors including under the Companies (Auditor`s Report) Order, 2020 for the years ended March 31, 2024, March 31, 2023 and March 31, 2022.

The company export its products to various countries and the company revenue from outside India represented 3.70%, 4.80%, 11.64% and 10.86% of its revenue from operations (excluding revenue from the sale of traded goods and other operating revenue and adding back discounts and incentives) for the nine months ended December 31, 2024, Fiscal 2024, 2023 and 2022, respectively. Any adverse events affecting these countries could have an adverse impact on its business, revenue operations, financial condition and cash flows.

Its manufacturing facilities are subject to operating risks. Any shutdown of its existing manufacturing facilities or other production problems caused by unforeseen events may reduce sales and adversely affect its business, cash flows, results of operations and financial condition.

Its operations involve activities and materials which are hazardous in nature and could result in a suspension of operations and/or the imposition of civil or criminal liabilities which could adversely affect is business, results of operations, cash flow and financial condition.

The company depends on its senior management and qualified and skilled personnel with technical expertise, and if the company is unable to recruit and retain senior management, qualified and skilled personnel, its business and the company ability to operate or grow its business may be adversely affected.

The company is dependent on its Promoter, Chairman and Managing Director, Vivek Gupta for the conduct and growth of business of the Company, given his industry knowledge and expertise in strategic business decision. His disassociation from the Company in future may adversely affect its business and the company growth prospects.

Any disruption to the steady and regular supply of workforce for its operations, including due to strikes, work stoppages or any other kind of disputes with its workforce or the company inability to control the cost of its workforce could adversely affect its business, cash flows and results of operations.

The company is dependent on third parties for the transportation its products to distributors or directly to end customers. Any failures by or loss of a third party transport service provider could result in delays and increased costs, which may adversely affect its business.

Under-utilization of its manufacturing capacities and an inability to expand its manufacturing capacities could have an adverse effect on its business, future prospects and future financial performance.

The company has experienced negative cash flows from operating activities in the nine months ended December 31, 2024. Its may continue to have negative cash flows in the future.

The company is not funding its capital expenditure requirements from its internal accruals.

The company is subject to strict quality requirements for its products and any product defect issues or failures by its or the company raw material suppliers to comply with quality standards may lead to the cancellation of existing and future orders, recalls or warranty and exposure to potential product liability claims.

Its insurance coverage may not be adequate or the company may incur uninsured losses or losses in excess of its insurance coverage which may impact on the company financial condition, cash flows and results in operations.

Any significant delay in receiving equipment and machinery purchased from outside India could impact its business, operations, cash flows and financial conditions.

The company has availed and will continue to avail benefits under the Export Promotion Capital Goods Scheme ("EPCG Scheme"), Duty Drawback Scheme and Remission of Duties or Taxes on Export of Products Scheme. Cancellation or its inability to meet the conditions under such schemes may adversely affect its business operations, cash flows, results of operations and financial condition.

Any failures to comply with sanctions administered by the United States or other governments could adversely affect its business and reputation.

Exchange rate fluctuations may adversely affect its business, financial conditions, cash flows and results of operations.

The company has certain contingent liabilities that have been disclosed in its financial statements, which if they materialize, may adversely affect its results of operations, cash flows and financial condition.

The company has had high trade receivables (Rs. 7,111.17 million as of December 31, 2024 and Rs. 2,399.03 million as of March 31, 2024 ) and other financial liabilities (Rs. 1,901.64 million as of December 31, 2024 and Rs. 1,488.14 million as of March 31, 2024) in the past. If the company is unable to effectively manage its receivables and liabilities, it could have an adverse impact on its business, financial condition, and results of operations.

The company has in the past entered into related party transactions and may continue to do so in the future.

A majority of its Directors are not directors of listed companies and hence lack of such adequate experience to address complexities associated with listed companies, could have an adverse impact on its business and operations.

Its manufacturing facilities, Registered and Corporate Office are not located on land owned by it and the company has only leasehold rights. In the event the company lose or are unable to renew such leasehold rights, its business, financial condition and results of operations may be adversely affected.

Any failures to protect its intellectual property rights could adversely affect its competitive position, business, financial condition and results of operation.

Its funding requirements and proposed deployment of the Net Proceeds of the Offer have not been appraised by a bank or a financial institution and if there are any delays or cost overruns, its business, cash flows, financial condition and results of operations may be adversely affected.

Any variation in the utilization of the Net Proceeds as disclosed in this Red Herring Prospectus shall be subject to certain compliance requirements, including prior approval of the Shareholders of the Company.

The company propose to repay or prepay all or a portion of certain outstanding borrowings availed by the Company and its Material Subsidiary, Oswal Solar.

Technology failures could disrupt its operations and adversely affect its business operations and financial performance.

The loss of certain independent certification and accreditation of its products and the manufacturing practices that the company has adopted could harm its business.

Its may undertake acquisitions, investments, joint ventures or other strategic alliances, which may have an adverse effect on its ability to manage the company business, and such undertakings may be unsuccessful.

Changes in technology may render its current machinery obsolete or requires it to make substantial capital investments. Any failures on its part to effectively address such situations, innovate and keep up with technological advancements, could adversely affect its business, results of operations, financial condition and cash flows.

Grants of stock options under its employee stock option plan may result in a charge to its profit and loss account and, to that extent, reduce the company profitability and financial condition.

Information relating to its annual installed capacity and the historical capacity utilization of its manufacturing facilities included in this Red Herring Prospectus is based on various assumptions and estimates and future production and capacity utilization may vary.

Its Promoters and members of the company Promoter Group will continue to hold a significant equity stake in the Company after the Offer and their interests may differ from those of the other shareholders.

Certain sections of this Red Herring Prospectus disclose information from the 1Lattice Report which is a paid report and commissioned and paid for by it exclusively in connection with the Offer and any reliance on such information for making an investment decision in the Offer is subject to inherent risks.

The Company will not receive any proceeds from the Offer for Sale portion by its Promoter Selling Shareholder.

Its Promoters and Directors are interested in the Company in addition to their remuneration and reimbursement of expenses.

Certain non-GAAP financial measures and certain other statistical information relating to its operations and financial performance have been included in this Red Herring Prospectus. These non-GAAP financial measures are not measures of operating performance or liquidity defined by Ind AS and may not be comparable.

The average cost of acquisition of Equity Shares for its Promoter Selling Shareholder may be lower than the Offer Price.

If the company is unable to establish and maintain an effective internal controls and compliance system, its business and reputation could be adversely affected.