This Quiet Power stock is surging. What does the market know that you don't?

Mint

15-07-2025

The transmission and distribution (T&D) industry has quietly emerged as one of the hottest infrastructure themes. Within it, high-growth niches like high voltage direct current (HVDC)—which enables long-distance electricity transmission with minimal losses—and flexible alternating current transmission systems (FACTS), designed to enhance grid stability and efficiency, are gaining rapid traction.
The domestic market for these segments is expected to grow at an annual rate of 60-65%, expanding from $1.4 billion in 2024 to $9 billion by 2028. Separately, the high-voltage power and power quality market is projected to grow at 18% annually over the same period.
Amid this surge in demand for advanced grid infrastructure, companies are scrambling to scale. Among the more compelling success stories is Quality Power, a relatively low-profile but fast-growing player in high-voltage equipment and power quality systems.
To fuel its next phase of growth and capture market share in this booming segment, Quality Power launched its ₹859 crore initial public offering (IPO) in February 2025. The stock debuted at ₹432 on 24 February but dropped to ₹274 by 9 April. Since then, it has soared 182% in just three months, closing at ₹773.
So, what's driving this rally—and can it sustain?
High-voltage play with strong tailwinds
Founded 24 years ago, Quality Power manufactures high-voltage electrical equipment and advanced power quality solutions critical for grid connectivity and energy transition. Its products are used in sectors including power, renewables, oil and gas, cement, chemicals, and automobiles. The company also benefits from green energy tailwinds.
Its portfolio includes coil products, transformers, capacitor banks, and shunt reactors. With a global footprint across over 100 countries and a client base of more than 210, Quality has grown through both product expansion and acquisitions. Past acquisitions include Endoks, S&S Transformers, EPEC, Nebesky, and, most recently, Mehru.
Out of the ₹859 crore raised via IPO, ₹225 crore was earmarked for business expansion— ₹117 crore for the Mehru acquisition, ₹27 crore for machinery purchases, and ₹61 crore for future M&A. Market interest intensified after the company laid out aggressive revenue targets tied to these inorganic efforts and its capacity expansion pipeline.
Strong FY25 performance
Quality's financials reflect momentum, boosted by industry demand.
In FY25, revenue rose 12% year-on-year to ₹337 crore, with power products contributing ₹185 crore (55%) and power quality systems ₹152 crore (45%). The domestic and export mix stood evenly at 50:50.
Within power products, coil products, used in HVDC and FACTS, saw significant traction, generating 20-25% margins. As a result, operating margins expanded by 600 basis points to 19% in FY25, up from 13%. Net profit surged 81% to ₹100 crore.
This growth was underpinned by rising investment in fixed assets, which grew from ₹34 crore in FY22 to ₹219 crore in FY25. Despite the capital investment, return on capital employed (ROCE) remained strong at 30%, down from 49% in FY22. Return on equity held steady at 26%.
The company's balance sheet also reflects financial discipline. Borrowings dropped 77% from ₹38 crore in FY24 to ₹9 crore in FY25. Free cash flow rose from ₹6 crore in FY22 to ₹48 crore in FY25. As of now, the company holds cash reserves of ₹210 crore.
Mehru adds scale and reach
With a strong balance sheet and momentum in core operations, Quality also made a strategic acquisition to expand product depth and international footprint.
In March, Quality acquired a 51% stake in Mehru for ₹120 crore using IPO proceeds. Mehru, a manufacturer of instrument transformers (up to 500 kV), has a strong export presence in Southeast Asia and Africa. The deal expands Quality's portfolio and client base to more than 50 countries and positions it to deliver integrated grid and renewable solutions.
In FY25, Mehru posted revenue of ₹256 crore—76% of Quality's consolidated topline. However, since the acquisition closed on 6 March, only ₹18 crore was consolidated into FY25 earnings. As of Q4FY25, Quality's order book stood at ₹750 crore, with Mehru contributing ₹350 crore (47%). The order book is expected to be executed over the next 15 months.
Given the full-year consolidation in FY26, Quality expects revenue to double to ₹700-850 crore. However, Mehru's lower PAT margin (12-13%) is expected to drag down consolidated Ebitda margins to 16-18%, from 30% in FY25. FY26 net profit is projected at ₹112-153 crore. The company expects margins to revert to 20% in a few years.
Demand is already outpacing supply. Mehru had to forgo orders worth ₹150 crore recently. To meet rising demand, Quality has launched a capacity expansion at Mehru's Bhiwadi facility within a month of acquisition.
The expansion includes four new autoclaves and relocating non-critical storage to a warehouse. Capacity will rise 45%, with new capacity online in five months. Order bookings are expected to pick up within six months, with a bid pipeline of ₹400 crore and peak revenue potential of ₹500 crore.
Sangli plant to become global coil hub
The Sangli unit—Quality's coil manufacturing hub for HVDC and FACTS—operates near full capacity. Notably, Quality is the only Indian firm that manufactures coil products rated at 220 kV and above, a segment with strong demand.
These coils currently contribute ₹160 crore to revenue. To capitalise, the company is expanding capacity 9x at Sangli, positioning it among the world's largest coil factories. The new facility is expected to go live in H2FY27 and could deliver peak revenue of ₹1,500 crore. Quality's bid pipeline, including Sangli, stands at ₹1,000 crore, with bookings expected to begin in 6–9 months.
Quality is also doubling capacity at its Cochin plant by Q3FY26 to meet HVDC/FACTS demand. A medium-voltage testing lab will be added to enhance quality control and validation.
With these expansions, Quality aims to reach peak annual revenue of ₹2,000 crore in four years— ₹500 crore from Mehru alone, assuming no further acquisitions. The workforce is also set to triple in two years, with 1,000 new hires planned soon. Near-term margin pressure is expected due to fixed cost absorption, though the company believes pricing power and demand will offset most of the impact.
Valuations rich—but tailwinds strong
Quality currently trades at a price-to-earnings (P/E) multiple of 90x—rich by industry standards. By comparison, peers like ABB (65x), Siemens (59x), and Transformers & Rectifiers (71x) trade lower. Only GE Vernova trades higher at 98x.
For more such analyses, read Profit Pulse.
Despite high valuations, strong demand, expansion visibility, a robust order book, low leverage, and high cash reserves make Quality Power one to watch. The promoters also waived a ₹5 crore dividend payout this year to preserve capital, underscoring their commitment to long-term growth.
About the author: Madhvendra has over seven years of experience in equity markets and has cleared the NISM-Series-XV: Research Analyst Certification Examination. He specialises in writing detailed research articles on listed Indian companies, sectoral trends, and macroeconomic developments.
Disclosure: The writer does not hold the stocks discussed in this article.
The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.