IPO closes on 30 Sep'25
Pace Digitek Ltd
Minimum Investment
₹ 14,892 / 68 shares
Our Verdict:
Neutral
- Pace Digitek Ltd (PDL) has demonstrated robust revenue and earnings growth over the past three years, with margins improving 3-4x in just two years. However, the key concern remains sustainability—whether these margins are primarily driven by specific PSU projects or can be sustained over the long term.
- In terms of valuations, PDL appears attractively priced with a P/E multiple of 13x.
- A major growth driver for the company is its entry into the Battery Energy Storage System (BESS) sector. The National Electricity Plan (NEP) 2023 forecasts the addition of 8.6 GW/34.7 GWh of capacity between 2022 and 2027. PDL is positioning itself to capitalize on this opportunity through its expansion plans, with IPO proceeds primarily earmarked for energy storage projects.
- The IPO provides exposure to two key growth themes: digital connectivity and BESS. While the BESS market holds significant promise, PDL is still in its early stages. Execution will be critical to success.
- PDL has evolved from a small-scale infrastructure contractor to a high-growth, margin-rich integrated solutions provider. Its substantial revenue growth, strong order book, superior margins and attractive valuations make the IPO fundamentally sound.
- However, there are structural risks, such as its heavy reliance on PSU contracts and the telecom sector. Moreover, the revenue run rate from existing 4G contracts is expected to decline in the near term as much of the project value has already been executed, raising questions about the company's ability to scale in the near future.
- Ultimately, the sustainability of the company’s profitability will depend on its execution discipline and ability to diversify its revenue sources. Investors should monitor the company's progress closely before making an investment commitment.
About the company
Founded in
1 Mar'07
Managing director
Maddisetty Venugopal Rao
- PDL is a leading infrastructure solutions provider with a strong emphasis on telecom infrastructure and a rapidly expanding presence in energy storage. The company offers a comprehensive range of services, including manufacturing, installation, commissioning and operations & maintenance (O&M) for telecom towers, optical fibre networks, and power management products.
- PDL operates three large facilities in Bengaluru, spanning a total of 200,000 sq. ft., where it produces telecom power equipment and lithium-ion battery racks in-house. This strategic vertical integration strengthens the company’s competitive edge in the market by ensuring better quality control and cost efficiencies across its product offerings.
STRENGTHS
- Exceptional Growth: PDL has experienced impressive growth, with operating revenue expanding at a remarkable 120% CAGR from FY23 to FY25. EBITDA surged by 256% and net profit skyrocketed by 311%. The company began its foray into turnkey optical fibre cable networks in 2022 and secured a major 4G saturation project from BSNL in 2023, significantly boosting its financial profile from FY24.
- Superior Margins: PDL has consistently improved its margins, with net profit margins increasing from 3.29% in FY23 to 11.44% in FY25. Its EBITDA margin also rose from 7.90% to 20.71%, making it the highest among its listed peers, showcasing the company’s ability to efficiently scale operations.
- Strong Return Ratios: PDL boasts strong financial performance, with a Return on Equity (ROE) of 23.09% and a Return on Capital Employed (ROCE) of 37.89% in FY25. These high return ratios reflect PDL's ability to generate significant shareholder value and effectively deploy capital.
- Solid Order Book: As of March 31, 2025, PDL’s order book stood at Rs 7,633.62 crore, all sourced from public sector contracts. This provides the company with strong multi-year revenue visibility, though it also introduces risks related to client concentration and potential delays due to bureaucratic processes.
RISK FACTORS
- Client Concentration: A significant portion of PDL’s revenue is dependent on a small group of clients. In FY25, the top 10 clients accounted for 96.25% of the total revenue. A loss or reduction in business from any of these key clients could substantially impact the company’s financial performance.
- Government Dependence: A large portion of PDL’s orders comes from government-related entities, which award contracts through a tender process. In FY25, 96.17% of the company's revenue came from public sector customers. The company's performance could be negatively impacted if it fails to win bids for these contracts or is forced to lower its bid value to remain competitive.
- Cash Flow Pressure: Despite the surge in profits, PDL has reported negative cash flow from operating activities in both FY25 and FY23. If this trend continues, it could strain the company’s financial flexibility, affecting its ability to invest in growth initiatives or manage day-to-day operations effectively.
Financials
All Values are in Cr.
Issue details
Issue type
Mainstream
Issue size
₹ 819.15 crore
Fresh Issue
₹ 819.15 crore
OFS
₹ -
Price range
₹ 208 - 219
Lot size
68 shares
Issue Objective
The net proceeds from the fresh issue will be utilized for the following purposes:
- Meeting the company’s working capital requirements; and
- General corporate purposes.
Dates
Bidding open
26 Sep'25
Bidding close
30 Sep'25
Allotment date
1 Oct'25
Refund date
3 Oct'25
Listing
6 Oct'25
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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