The IPO of Zetwerk Manufacturing Businesses is open for subscription until Monday. The company, which runs a tech-based manufacturing platform, expects to raise ₹2,830 crore, while promoters and existing investors, including Peak XV, Accel and Lightspeed, are offering shares worth ₹2,182 crore through an offer-for-sale (OFS). The promoter and promoter group stake, currently about 21 per cent, is expected to fall to 16 per cent after the IPO, before considering the dilution from ESOP shares. The company intends to pay down debt of ₹2,160 crore (out of ₹3,366 crore as of August 31, 2026) and use the remaining proceeds for acquisitions and general corporate purposes.

At the upper end of the IPO price band, Zetwerk is valued at an enterprise value of around ₹24,225 crore or at about 58x FY26 adjusted EBITDA. The eight-year-old start-up has no listed peers and is yet to become profitable.

Zetwerk operates at the intersection of two key areas of investor interest today — technology and manufacturing. It serves customers in sectors such as energy, consumer electronics, aerospace and precision engineering. However, considering the company’s profitability and the factors mentioned under ‘What doesn’t work’, the asking multiple looks expensive in our view. We recommend that investors give the IPO a pass for now and consider investing after listing, once they have greater conviction in the company’s execution capabilities.

Zetwerk serves companies operating in sectors such as utilities, renewables, consumer electronics, aerospace, defence, oil & gas and AI (the ‘customers’). Its customers include marquee names such as Siemens Gamesa, Acer, boAt, CG Power, NTPC, Indian Oil, DRDO and the Indian Air Force. When a customer is in need of intermediate components/ inputs in the manufacturing process or is looking to outsource the manufacturing of certain components, it sends the order to Zetwerk. At the other end, Zetwerk is connected to about 7,000 manufacturers (called third party suppliers), often MSMEs with low capacity utilisation and looking for scale. These third-party suppliers are capable of processes such as stamping, fabrication, machining, forging, die casting and assembling, and are spread across several countries including the US, Taiwan, Vietnam, Germany, Spain and Mexico, besides India.

Zetwerk now chooses an appropriate supplier(s) and sends the order to them for execution. Once the supplier is ready to deliver, Zetwerk purchases the goods from the supplier(s) and sells them to its customer. Contracts with customers are on principal-to-principal basis and Zetwerk is eventually accountable to deliver quality products as per the customer’s specifications. To ensure this, it deploys more than 2,250 operations staff at supplier facilities to coordinate production and supervise quality.

To complement the capacities of the suppliers in the network, Zetwerk has also built its own manufacturing facilities (both greenfield and acquired) for some processes such as assembling and finishing. Here, Zetwerk procures materials, employs labour and manages the process risk.

All these operations are managed through Zetwerk’s proprietary platform, Zetwerk OS, which covers the entire process — from order enquiries and supplier selection to quality assurance and logistics. Customers also get real-time visibility into order status.

These activities form Zetwerk’s first operating segment, ‘Manufacturing business’. The segment generated revenue of ₹9,375 crore in FY26, of which about a third came from its own manufacturing facilities (see chart for growth and margins). Products delivered include wind turbines, transformers, transmission switchgears, wires, cables, railway girders, washing machine motherboards, headsets, wearables and space antennae.

Zetwerk’s suppliers regularly use ferrous and non-ferrous metals and materials such as petrochemicals. The company negotiates bulk or repeat orders with large mills and manufacturers to secure lower prices. Leveraging this purchasing advantage, it has built a separate trading platform for these materials, selling them at a small markup (see chart for margin). Buyers include not only suppliers in Zetwerk’s network but also other businesses. Small-scale operators that may not otherwise benefit from bulk purchasing can also use the platform. This constitutes Zetwerk’s second operating segment, ‘Ecosystem business’.

Between FY24 and FY26, overall revenue has grown at a CAGR of 13.5 per cent, EBITDA at 293 per cent and adjusted EBITDA (adjusted for ESOP cost) at 108 per cent. Revenue from the core manufacturing segment has grown at a higher CAGR of 24 per cent.

Within manufacturing, energy products (solar modules, transformers, switchgears, wires, wind turbine nacelle sub-assembly, etc.), precision products (wearables, laptops, displays, PCBs, EV chargers, machined/ cast/ fabricated metal products, etc.) and capital goods (process equipment like reactors, tanks, steel structures, etc.) accounted for 69, 15 and 16 per cent of FY26 manufacturing revenue. These sub-segments have grown at CAGRs of 25, 55 and 5.5 per cent, over the same period.

Geographically, India, the US and the rest of the world have accounted for about 80, 18 and 2 per cent of FY24-26 overall revenue on average.

Manufacturing revenue from repeat customers has improved from 78 per cent in FY24 to 80 per cent in FY26 and to 89 per cent in Q1 FY27. Net revenue retention rate stands at a median of 1.29x over FY24-26. This indicates that repeat customers have roughly given Zetwerk 29 per cent more business in the current year than the preceding year. These metrics show Zetwerk’s ability to consistently deliver on quality, especially given it works with the above marquee names.

New manufacturing order inflows were ₹15,393 in FY26, having grown at a CAGR of 31 per cent. Currently, the manufacturing order book stands at ₹13,062 crore or 1.4x FY26 manufacturing revenue.

Zetwerk gets both ‘built-to-print’ and ‘original design manufacturing (ODM)’ orders. ODM orders require Zetwerk to design the product on its own besides manufacturing it, while built-to-print orders do not. ODM orders typically have higher realisation. Share of ODM revenue has risen from 8 per cent in FY24 to 14 per cent in FY26.

Above all, the share of revenue from own manufacturing facilities is also on the rise — from 7 per cent in FY24 to 33 per cent in FY26. As captive manufacturing is a relatively recent initiative, rising scale of operations could create scope for margin expansion. Here’s how. When Zetwerk executes an order purely at the facilities of third-party suppliers, it purchase cost also includes the supplier’s margin. Producing the order at its own facilities, even partially, allows Zetwerk to retain some or all of that margin. The customer’s quoted price (Zetwerk’s selling price) remains the same in either case.

One, some of the company’s past decisions could raise concerns about its ability to execute and allocate capital effectively. Towards the end of FY26, it discontinued its third segment ‘Civil infrastructure works’, which involved building water pipelines and railway tracks, after the segment proved to be a drag on working capital. The segment’s assets and liabilities are now classified as held for sale and are expected to be disposed by end of FY27. The segment’s net losses (attributable to equity owners) in FY24-FY26 were ₹65 crore, ₹156 crore and ₹642 crore, respectively, compared with losses of ₹854 crore, ₹210 crore and ₹991 crore, respectively, from the other two segments (continuing operations). However, the latter figure for FY26 was only about ₹195 crore after adjusting for a net-worth-neutral one-off item. For perspective, adjusted EBITDA from continuing operations stood at ₹97 crore, ₹323 crore and ₹421 crore over FY24-FY26.

Net exceptional losses from continuing operations in FY24-FY26 were ₹372 crore, ₹84 crore and ₹39 crore, respectively, after adjusting for the net-worth-neutral one-off item, taking the cumulative loss to ₹495 crore. Of the ₹616 crore in exceptional items, provisions for bad debts, supplier advances and unbilled revenue, impairment allowances and restructuring expenses accounted for a significant portion. Management explained that most of these expenses related to the discontinued segment. Losses of this magnitude could have been avoided had management recognised the business’s working-capital-intensive nature before entering it. The prospectus also mentions an apparel trading business discontinued in FY24. An impairment loss of ₹62 crore against this investment is included in the ₹616 crore of exceptional items cited above.

Two, positive operating cash flows turned negative after accounting for working capital changes, in each of the three years. The trend continued into Q1 FY27.

Three, the business model allows room for leakages — meaning, some customers may try to bypass Zetwerk and send orders directly to the third-party suppliers. However, management’s defence is that the company can offer customers quotations competitive with market prices.

Four, the energy products sub-segment, which accounts for 69 per cent of manufacturing revenue, has gained significant momentum, with a revenue CAGR of 25 per cent, partly driven by the boom in AI-related capital expenditure. This growth could slow if sentiment around AI turns negative.

Five, auditors made several adverse observations in FY24 and FY25, including weaknesses in the internal audit system and the absence of a robust mechanism for physical inventory verification. They also cited ineffective internal controls over certain processes, potentially exposing revenue and receivables to misstatement risks. The absence of adverse remarks in FY26 and Q1 FY27 suggests that the company may have taken corrective action.

Overall, the company appears to have tried to clean up its books and present a couple of stable businesses to public shareholders, ahead of its IPO — which is a plus. However, the asking price appears particularly steep against this backdrop and a volatile equity market. Prudent, value-conscious investors may want a margin of safety against execution slip-ups, before considering the offer.

Published on October 17, 2026