S. G. Encon Limited IPO

01At a glance

What the company does: operation and maintenance (O&M) of telecom towers, cell sites and optical fibre networks, plus network rollout and small construction and underground pipeline works; telecommunication services were 98.62% of FY26 revenue (DRHP p.29).

Who pays it: telecom operators, almost entirely. The largest customer gave 90.43% of FY26 revenue and the top ten gave 99.63% (DRHP p.257, DRHP p.31). The document does not name its customers in the concentration tables, but says, citing its commissioned CRISIL report, that it serves as a vendor to Reliance Jio and Indus Towers (DRHP p.257, DRHP p.258).

Why it is raising money: ₹42.7 crore for working capital and ₹32.3 crore for machinery, mainly horizontal directional drilling (HDD) rigs, with the rest of the fresh issue for general corporate purposes (DRHP p.103). The rupee size of the fresh issue is not yet stated (DRHP p.1).

How fast it has grown: revenue from ₹233.9 crore in FY24 to ₹287.0 crore in FY26, a CAGR of 10.8%; profit after tax from ₹9.2 crore to ₹22.9 crore, a CAGR of 57.9% (our arithmetic, DRHP p.65).

The one thing to understand: this is, in effect, a single-customer O&M contractor. One customer is 90.43% of revenue and 92.31% of the order book (DRHP p.257, DRHP p.31), customers deducted penalties of ₹27.1 crore in FY26 against ₹3.3 crore in FY24 (DRHP p.34), and profit has not turned into operating cash in any of the three years shown (DRHP p.66).

02The business, in plain words

S. G. Encon sends field staff to keep other companies' telecom networks running. Its technicians visit towers and cell sites for preventive and breakdown maintenance, manage uptime, and lay and repair optical fibre cable (OFC). The customer usually supplies the telecom equipment and materials; the company supplies people, tools and supervision (DRHP p.239).

A telecom operator needs its towers and fibre kept running in a circle → it awards S. G. Encon a three to five year O&M work order → the company deploys technicians and contract labour across the sites → it bills against the work order, less any penalties for missed uptime or restoration time.

O&M contracts run three to five years (DRHP p.105). The company worked in five telecom circles in each of the last three years and had 6,104 employees at 31 August 2026, of whom 4,081 were technical staff (DRHP p.240, DRHP p.260). A small construction vertical does civil, interior and fuel-station works, and an oil and gas and sewerage vertical lays pipelines with two HDD rigs (DRHP p.241, DRHP p.259).

This is a people business. Employee benefit expense was ₹169.3 crore in FY26, 58.99% of revenue from operations (DRHP p.40).

Earnings equation: Revenue ≈ sites and fibre kilometres under contract × rate per work order − penalties deducted, and Profit ≈ revenue − wages of the field workforce − construction and operating expenses − overheads. The document gives sites and kilometres maintained, but not the rate per site or per kilometre.

03Where the money comes from

Source: DRHP p.31, DRHP p.257, DRHP p.258.

The largest customer gave ₹259.5 crore of FY26 revenue (DRHP p.257). In FY24 the second-largest customer gave 21.14%; by FY26 the second-largest gave 5.95% (DRHP p.258, DRHP p.257). The company served 18 customers in FY26 (DRHP p.31).

Source: DRHP p.29.

By state, FY26 revenue came from Uttar Pradesh 36.46%, Haryana 22.90%, Punjab 22.25%, Delhi 14.87% and Rajasthan 3.52%; all of it came from North India in each of the three years (DRHP p.30, DRHP p.29).

Revenue depends on one customer, in numbers: nine rupees in every ten in FY26.

04The growth record

Source: DRHP p.64, DRHP p.65, DRHP p.66, DRHP p.125. Borrowings are current plus non-current borrowings from the balance sheet (our arithmetic, DRHP p.64).

Revenue CAGR FY24 to FY26 was 10.8%, EBITDA CAGR 59.8% and PAT CAGR 57.9% (our arithmetic, DRHP p.65, DRHP p.125); the company itself states a revenue CAGR of 10.77% (DRHP p.247). EBITDA margin moved up 560 basis points, from 5.17% to 10.77% (DRHP p.125). Year by year, revenue rose 18.04% in FY25 and 3.94% in FY26, and profit rose 51.77% and then 64.20% (DRHP p.385, DRHP p.383).

The FY25 and FY24 figures come from special purpose Ind AS statements prepared from accounts earlier kept under Indian GAAP (DRHP p.300). Operating cash flow was an outflow of ₹1.8 crore in FY26 (DRHP p.66).

05What the growth is made of

Revenue rose from ₹233.9 crore in FY24 to ₹287.0 crore in FY26 (DRHP p.65), and almost all of the increase was telecommunication services, up from ₹230.6 crore to ₹283.0 crore (DRHP p.29). Telecom sites under maintenance rose from 71,491 to 79,445, while fibre maintained was 91,579.95 km in FY24 and 92,002.68 km in FY26 (DRHP p.240).

By customer, the largest customer's revenue rose from ₹171.2 crore in FY24 to ₹259.5 crore in FY26, while the FY24 second-largest customer's share fell away (DRHP p.258, DRHP p.257).

The profit growth came mostly from costs. Employee benefit expense fell from 66.81% of revenue in FY24 to 58.99% in FY26, and fell in absolute terms in FY26 by ₹3.5 crore (DRHP p.40, DRHP p.384).

The offer document does not disclose billing rates per site or per kilometre, so the increase cannot be separated into volume and price.

06Earnings quality

The one that needs explaining is cash. Operating cash flow before working capital rose from ₹15.1 crore in FY24 to ₹31.1 crore in FY26, but other current assets absorbed ₹19.9 crore in FY26 and ₹16.9 crore in FY25, and tax paid took ₹5.4 crore in FY26 (DRHP p.66). Other current assets are mostly contract assets, work done but not yet billable, which rose from ₹14.8 crore to ₹41.1 crore, and retention money, which rose from ₹1.2 crore to ₹4.1 crore (DRHP p.39). The FY26 balance also includes ₹3.8 crore of advance for IPO expenses (DRHP p.108).

Read from the filing: the supplier table leaves out "recovery expense", and construction and operating expenses less the supplier total (excluding materials) equal the penalty figures in each year (our arithmetic, DRHP p.30, DRHP p.65), which suggests the penalties are booked inside construction and operating expenses. The MD&A attributes the rise in those expenses to "higher recovery expenses" (DRHP p.384, DRHP p.386). FY24 other income of ₹3.3 crore included exceptional miscellaneous balances not repeated in FY25 (DRHP p.385).

07The balance sheet

Source: DRHP p.64.

At 31 March 2026 cash of ₹13.4 crore exceeded borrowings of ₹8.6 crore, a net cash position of ₹4.9 crore (our arithmetic, DRHP p.64). Debt including lease liabilities and accrued interest was ₹8.8 crore, a debt to equity ratio of 0.09 (DRHP p.357). At 31 August 2026 outstanding borrowings were ₹9.5 crore, of which ₹8.1 crore unsecured, against sanctioned facilities of ₹18.4 crore (DRHP p.358).

Contingent liabilities were ₹1.0 crore at March 2026, three GST demands for FY 2019-20 that the company disputes (DRHP p.68). Gratuity of ₹4.0 crore is entirely unfunded (DRHP p.37).

The post-issue balance sheet cannot be drawn: the fresh issue has no rupee size and the capitalisation statement leaves the post-offer column blank (DRHP p.357).

08What the money is for

Source: DRHP p.103. General corporate purposes may not exceed 25% of gross proceeds (DRHP p.103).

Working capital: the company projects net working capital of ₹93.6 crore in FY27 and ₹169.0 crore in FY28, with receivable days of 73 and 75 (DRHP p.110). These are the company's own projections, used to size the object.

Machinery: three Vermeer HDD rigs (₹3.8 crore, ₹6.4 crore and ₹21.0 crore), a compartment bin plant of ₹0.7 crore and a concrete pump, all on quotations dated August and September 2026 with no orders placed (DRHP p.114, DRHP p.49). The HDD rigs serve the oil and gas and sewerage vertical, which was 0.70% of FY26 revenue (DRHP p.29).

Into the business: 71,90,400 new shares; rupee amount not yet stated (DRHP p.1). To selling shareholders: 13,71,300 existing shares from the two promoters; rupee amount not yet stated (DRHP p.1).

At DRHP stage both parts are share counts, not amounts. The offer for sale is 16.0% of the 85,61,700 shares offered (our arithmetic, DRHP p.1).

09Who is selling

Source: DRHP p.1, DRHP p.89. The percentage is our arithmetic.

The certified average cost of acquisition for both selling shareholders is "negligible" (DRHP p.1, DRHP p.91).

10Promoters

The promoters are Rajiv Gandhi, Chairperson and Whole-Time Director, and Pankaj Setia, Managing Director (DRHP p.294). They bought the whole company from its original promoters on 31 May 2011, three years after it was incorporated as HemOnc Infusion Resources Private Limited (DRHP p.294, DRHP p.268). Both hold civil engineering degrees and over 15 years of experience (DRHP p.278). The document states that none of the directors are related to each other (DRHP p.279).

Pay: Each promoter received ₹0.6 crore in FY26, against ₹0.72 crore each in FY24 (DRHP p.69). Combined promoter remuneration was ₹1.4 crore in FY24 and ₹1.2 crore in FY26 (our arithmetic, DRHP p.69). From 23 August 2026 each has a basic salary of ₹6 million a year, with annual increments of up to 50% and commission of up to six months' salary (DRHP p.279, DRHP p.280).

Other interests: Promoter group entities are Preferrack, Dystinction Technologies Private Limited and SB Infracon (DRHP p.296). The company has no group companies and no subsidiary (DRHP p.405, DRHP p.280). Neither promoter holds another directorship (DRHP p.276).

Litigation and pledges: There are no cases against the promoters (DRHP p.399). No promoter shares are pledged (DRHP p.96).

Promoter economics: the promoters paid ₹1 a share in 2011, received a 399:1 bonus in March 2019 and a 5:1 bonus in September 2026, and transferred 20,060 shares each in February 2025 at ₹10 (one transfer by Pankaj Setia at ₹1) (DRHP p.87, DRHP p.90). The weighted average cost of shares acquired in the last year was nil for both, as those shares came from the bonus (DRHP p.93).

11Who already owns it

Source: DRHP p.97, DRHP p.96. The last row is our arithmetic. Total shares before the issue are 26,887,500 (DRHP p.78).

The promoters hold 88.36% before the issue (DRHP p.87). After the fresh issue and the offer for sale, the share count would be 34,077,900 and the promoters would hold 22,387,980 shares, 65.7% (our arithmetic, DRHP p.78, DRHP p.89).

Most non-promoter holders came in between September 2025 and January 2026 at ₹400 a share before the 5:1 bonus: Sahastraa Advisors Private Limited in November 2025 and Invicta Continuum Fund I in January 2026 (DRHP p.91, DRHP p.92). Ten individuals received small transfers from the promoters in February 2025 at ₹10 a share, one of them at ₹1 (DRHP p.90). The weighted average cost of all shares transacted in the last year is ₹6.26 and in the last eighteen months ₹8.41 (DRHP p.94).

12What changed just before the IPO

• Rights issue: 37,500 shares at ₹400 on 3 September 2025 (DRHP p.79).
• Private placements: 87,500 shares on 19 September 2025, 281,250 on 19 November 2025, 6,250 on 20 November 2025 and 68,750 on 16 January 2026, all at ₹400 (DRHP p.79, DRHP p.80, DRHP p.81). Share capital raised in FY26 was ₹19.3 crore (DRHP p.66).
• Last priced allotment: ₹400 a share, January 2026 (DRHP p.81).
• Bonus issue: 5 shares for every 1 held, allotted 23 September 2026, taking the share count to 26,887,500 (DRHP p.81).
• Public company: converted, with a fresh certificate dated 2 May 2025 (DRHP p.3).
• Auditors: no change of statutory auditor in the last three years (DRHP p.72).
• Management: a CEO appointed from December 2025, and a CFO and company secretary from 10 August 2026 (DRHP p.292). Three independent directors joined in June and July 2026 (DRHP p.277).
• Margin: EBITDA margin rose from 5.17% in FY24 to 10.77% in FY26 (DRHP p.125).
• Penalties: customer penalties rose from ₹3.3 crore in FY24 to ₹27.1 crore in FY26 (DRHP p.34).
• Compliance: the company has filed suo motu adjudication applications with the RoC over past filing lapses, including late appointment of independent directors and an incorrect FY 2024-25 shareholder list (DRHP p.46).

13Capacity and expansion

S. G. Encon does not manufacture, so capacity is measured in sites, kilometres and rigs.

Source: DRHP p.240, DRHP p.40. The fibre figure for FY24 is given elsewhere as 95,579.95 km (DRHP p.239).

The company owns two HDD rigs, of 50 and 40 tonne capacity (DRHP p.259). The issue would add three HDD rigs (DRHP p.114). The document gives no rig utilisation figure. Employee attrition was 32.33% in FY26 (DRHP p.260).

14Market size and industry structure

As claimed: the CRISIL report, commissioned and paid for by the company and dated September 2026, puts the telecom tower maintenance market at about ₹50 billion in FY26, up from ₹28 billion in FY21, and projects ₹73 to 76 billion by FY31 (DRHP p.178, DRHP p.28). Those projections are CRISIL's.

The part that is addressable: tower maintenance in the five North India circles where the company works. The report's figure counts only tower maintenance spending and excludes rent, power and fuel (DRHP p.178). The document does not split the market by circle.

What the company is today: FY26 revenue of ₹287.0 crore set against a ₹5,000 crore national tower maintenance market is 5.7% (our arithmetic, DRHP p.65, DRHP p.178). The comparison is loose, because the company's revenue also includes fibre maintenance.

Structure, per the commissioned report: the HDD and underground utility segment is fragmented and price-driven, and public construction contracts are mostly awarded to the lowest bidder (DRHP p.259).

15Competitive position

Source: DRHP p.122, DRHP p.123. PAT margins are our arithmetic. Borrowings are not given for the peers.

What the document claims, and what it rests on:

• Length of relationship: more than a decade with the leading telecom operator it serves (DRHP p.31).
• Repeat customers: six customers of more than three years gave 91.17% of FY26 revenue (DRHP p.31).
• Scale of field workforce: 6,104 employees at August 2026 (DRHP p.260).

The commissioned report names Aerial Telecom Solutions, Pratap Technocrats, Narula Infrastructure, Pace Digitek and Annu Projects as key competitors (DRHP p.259). The document gives no evidence of pricing power; its customers deduct penalties (DRHP p.34).

16Peers the company named

Peers named in the offer document: Pace Digitek Limited and Annu Projects Limited (DRHP p.122).

• Pace Digitek had FY26 revenue of ₹2,641.3 crore, about nine times S. G. Encon's, and a P/E of 11.20 on 23 September 2026 (DRHP p.122).
• Annu Projects had FY26 revenue of ₹241.2 crore, close to S. G. Encon's, and a P/E of 7.68 (DRHP p.123).

The peers' average P/E is 9.44 (DRHP p.121). No P/E is possible for S. G. Encon until a price band is set. Its FY26 EPS is ₹9.11 and net asset value per share ₹35.11, both after the bonus (DRHP p.120, DRHP p.122).

17Risks, in plain words

• Customers. One customer gave 90.43% of FY26 revenue (DRHP p.257) → a loss or cut in that work order would remove most of the business, since the next customer gave 5.95% → the same customer is 92.31% of the order book (DRHP p.31).
• Penalties. Customers deducted ₹27.1 crore in FY26 for outages and slow restoration (DRHP p.34) → penalties grow with the contract, not with profit → FY26 penalties were larger than FY26 profit after tax of ₹22.9 crore (DRHP p.65).
• Cash. Operating cash flow was negative in all three years (DRHP p.66) → growth needs cash before customers pay → net working capital days rose from 57 to 102 (DRHP p.110).
• Workforce. Employee costs were 58.99% of revenue and attrition 32.33% in FY26 (DRHP p.40) → wage increases flow straight into margin → gratuity of ₹4.0 crore is unfunded (DRHP p.37).
• Statutory dues. Provident fund deposits of ₹6.1 crore were paid 1 to 147 days late in 48 instances in FY26, and TDS of ₹1.1 crore 72 to 212 days late (DRHP p.45).
• Geography. All revenue came from North India (DRHP p.29).
• Issue-specific. The promoters' cost of acquisition is negligible, and the offer for sale goes to them (DRHP p.53, DRHP p.55).

18Litigation and regulatory matters

Source: DRHP p.398, DRHP p.399, DRHP p.68.

The GST demands total ₹9.69 million: tax ₹3.49 million, interest ₹2.62 million and penalty ₹3.59 million, from Haryana, Punjab and Uttar Pradesh (DRHP p.68). The materiality threshold for disclosure is ₹7.67 million (DRHP p.397). Separately, the company has pending RoC adjudication applications over past filing lapses (DRHP p.46).

19Related-party transactions

Source: DRHP p.69, DRHP p.70.

Related-party transactions were ₹1.9 crore in FY26, 0.66% of revenue (DRHP p.70). The one new arrangement in FY26 is a ₹1.00 million unsecured loan from Pankaj Setia, still outstanding at March 2026 (DRHP p.69). The document shows no sales to or purchases from related parties.

20What the offer document does not say

• Customer names in the concentration tables, for lack of consent (DRHP p.258).
• Rates per site or per kilometre, so growth cannot be split into volume and price.
• Penalties by contract or cause, and where exactly they sit in the accounts; the link to "recovery expense" is our reading (DRHP p.30, DRHP p.34).
• Margin by vertical.
• Utilisation of the two HDD rigs, or the order pipeline that the three new rigs are meant for.
• The rupee size of the issue, the price band and the post-offer holdings, normal at DRHP stage (DRHP p.1, DRHP p.99).
• General corporate purposes, in rupees (DRHP p.103).

21Five questions for management

1. What share of the largest customer's work order is renewable in the next two years, and on what terms?
2. How much of the ₹27.1 crore of FY26 penalties came from one contract, and how is it recorded in the accounts?
3. What revenue do the three new HDD rigs need to cover their cost, given the HDD vertical earned ₹2.0 crore in FY26?
4. Why did other current asset days rise from 27 to 69 while receivable days fell?
5. What drove employee cost from 66.81% to 58.99% of revenue while sites maintained grew?

1Sources and cited facts

This study was read from 1 document the company filed. The 115 figures it cites are listed under the document each came from, with the page and the sentence as printed.