Bonfiglioli Transmissions is launching an IPO that closes on Oct 19. The company is offloading a 23 per cent stake to raise ₹2,533 crore. With strong parentage and R&D backed sales growth, the firm operates across industry, off-highway, and wind segments. Investors can subscribe to the IPO for long-term gains.
Bonfiglioli Transmissions – a leading domestic manufacturer of gearboxes and drives – is launching an IPO that closes on Oct 19. The company is a 100 per cent subsidiary of Bonfiglioli S.p.A., a 70-year-old Italian family-owned multinational that manufactures similar products and reported revenue of €1.17 billion in FY25. The IPO is entirely an offer for sale (OFS), with the promoter offloading a 23 per cent stake to raise ₹2,533 crore.
At the upper end of the price band, the IPO values the company at 37 times earnings - which have grown at 27 per cent CAGR in FY23-25 (the company follows December ending fiscal). Given its strong parentage, R&D backed sales growth, an attractive end-market and valuations comparable with those of peers, investors can subscribe to the IPO
Business
The company operates in three segments – Industry & Automation solutions (42 per cent of H1FY26 revenues), Off-highway mobility (28 per cent) and Wind industry (27 per cent). Headquartered in Tamil Nadu, it operates two plants in the State and one in Pune.
The first segment manufactures gear motors and gear boxes which are used in several industries which employ automated manufacturing - material handling, chemicals, pharma, FMCG, metal processing and rubber. Clients include ElectroMech Material Handling Systems, GMM Pfaudler, Ammann India and others.
The Off-highway segment manufactures drives that cater to OEMs in earthmoving, excavators, mining, road construction, and agriculture segments including ACE, Ajax, JCB and Hyundai Construction.
The Wind Industry segment manufactures yaw and pitch drives, which turn wind turbines and adjust blade angles, respectively, to optimise power generation based on wind direction. Its clients include Suzlon and Nordex India.
The three segment products are mission critical to the OEMs or clients, despite being only a small portion of the cost. The development, testing, and high degree of precision act as a natural barrier favoring the company which itself benefits from strong parentage operating in similar fields.
R&D and strong parent
The strong R&D backed portfolio is evident in its leading market shares of 25 per cent, 32 per cent and 68 per cent in the Industry & Automation Solutions, Off-highway Mobility and Wind Industry segments, respectively.
The Industry & Automation Solutions segment benefits from a well-developed product portfolio with applications across diverse industries. As India increasingly emphasises manufacturing automation, following the lead of European markets, a proven catalogue of products gives the company an advantage. Its parent provides designs and R&D support and, in return, receives royalties (about 4.5 per cent of consolidated sales, rising to 6 per cent at the product level), intellectual property (IP) licence fees, where applicable, and payments for components and parts. Purchases from the parent account for about 11 per cent of sales, depending on product economics. The company says localisation efforts have reduced this ratio from 15 per cent in FY24.
In the Off-highway Mobility and Wind Industry segments, about 90 per cent of sales come from co-developed products. These are developed jointly by the company and its parent, in collaboration with clients, with the IP held by either the company or its parent. The red herring prospectus (RHP) indicates a development timeline of 24-30 months for such products, helping strengthen customer retention and creating a significant entry barrier for competitors.
The company has consistently generated around a third of the consolidated sales from products launched in the last three years, underscoring the commercial potential of its product development pipeline.
Attractive end-user scope
All the three segments are facing strong end-user prospects.
The industry & automation segment stands to gain from increasing manufacturing automation and capacity additions, (essentially in cement, steel, pharma and food processing). The sector also benefits from its diversity. While the 2020-24 period benefited from a surge in capital expenditure in the chemicals industry, current demand is being supported by investments in biogas, ethanol and allied sectors. Solar modules, electronics manufacturing services (EMS) and consumer durables are also seeing capacity expansion, benefiting the company. Production-linked incentive (PLI) schemes and the China-plus-one strategy provide additional tailwinds.
The company reported 36 per cent y-o-y growth in Off-highway sector in H1FY26 owing to China +1 factor. But the segment should primarily benefit from the strong emphasis on infrastructure building by the government. The wind segment, meanwhile, stands to gain from the target of nearly doubling India’s wind power capacity (to 100 GW) by 2030.
Exports accounted for nearly 30 per cent of revenues in H1FY26, led by US and Europe.
Financials and valuation
Despite favourable demand prospects, investors should factor in the cyclical nature of industrial activity and its impact on the company's performance. Revenue grew at a modest pace of 9 per cent between FY23 and FY25, amid slower industrial activity. However, revenue rose 18 per cent year-on-year to ₹1,132 crore in H1FY26, indicating a recovery.
Despite modest revenue growth in FY23-25, EBITDA margin improved from 14.5 per cent to 19.8 per cent, driven by localisation, capacity utilisation of more than 70 per cent across segments and operational efficiencies. The company also exited low-margin segments, while its diversified client base supported performance. EBITDA and PAT grew at CAGRs of 23 and 27 per cent in FY23-25.
At 37 times earnings, the IPO is valued competitively against peers such as Elecon Engineering (32 times), Shanthi Gears (63 times), Schaeffler India (54 times) and Timken India (58 times). Although these companies are not directly comparable, given their differing exposure to gears, components and bearings, Bonfiglioli Transmissions' valuation finds support in the market's focus on manufacturing-led growth.