Megatherm

Megatherm Induction Limited manufactures induction melting and heating products, large transformers (5,000 KVA to 50,000 KVA), and metallurgical equipment like casting machines and various furnaces. The company caters to diverse industries including primary and secondary steel, auto ancillaries, ordinance factories, railways, and ductile iron pipe producers. Megatherm also exports its products to several countries, with a focus on increasing its international business.

The Indian market for induction products (steel, foundry, and heating sectors) is estimated at ₹2,300-2,400 crores, while the transformer market is multi-billion dollar. Megatherm competes with Electrotherm in the steel segment and Inductotherm in foundry and heating. The company differentiates itself through energy-efficient equipment, product robustness, minimized downtime, and strong hands-on service, which it believes gives it an edge over larger American and Chinese competitors.

Megatherm has completed its CapEx for capacity expansion, including a new transformer manufacturing facility, which is now commissioned. This expansion positions the company to achieve a target of ₹500 crores revenue within two years, up from the current ₹300 crores. The company aims to improve its bottom line from the current 6-7% to 9% within a couple of years, driven by backward integration initiatives such as CRNGO processing and copper drawing machines, and increased turnover.

To penetrate the North American market, Megatherm has formed a joint venture with Cyprium Induction USA. Cyprium, with current sales of $2.5 million, will primarily handle sales and marketing in the US. Megatherm will manufacture the core equipment in India, leveraging its lower engineering costs. This collaboration is designed to overcome market entry barriers and potential tariffs (estimated at 27-35%) by offering a competitive price advantage, with Megatherm holding a 49.99% profit share from the JV.

The new transformer manufacturing facility is a key growth driver. Management expects CPRI testing, a crucial certification, to be completed in June 2025. Following this, initial small orders from major players like Renew, Tata Solar, and Adani are anticipated from the second half of the current financial year. The company has targeted approximately ₹150 crores from transformer sales in the next financial year, contributing significantly to the overall revenue target.

For FY25, Megatherm's revenue was around ₹300 crores, with the bottom line hovering between 6-7%. The company has strategically increased spending on HR and marketing to support its projected growth. All term loans have been repaid, eliminating associated interest costs. While working capital requirements are expected to increase with expansion, unutilized IPO proceeds are reserved to manage these future needs. The company's Return on Capital Employed (ROCE) is currently around 20%.

The current order book stands at approximately ₹350 crores, reflecting a 16.67% year-on-year growth from ₹300 crores last year. This order book is generally expected to be executed within one year. Megatherm is actively pursuing large bulk orders, with several in the pipeline. The company aims to significantly increase its export revenue mix for induction products to around 30%, up from 10-12% in the last financial year, as a key component of its growth strategy.