Zetwerk Raises ₹500 Cr Funding for IPO Push, Expands Defence Operations

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AuthorVihaan Mehta|Published at:
Zetwerk Raises ₹500 Cr Funding for IPO Push, Expands Defence Operations
Overview

Bengaluru-based contract manufacturer Zetwerk is preparing for its Initial Public Offering (IPO) by securing approximately ₹500 crore in a pre-IPO funding round. The company has confidentially filed its draft IPO papers and appointed a syndicate of investment banks, including Kotak Mahindra Capital and Morgan Stanley, to manage the process. This strategic move comes as Zetwerk, which reported ₹12,980.7 crore in revenue for FY25 with narrowed net losses, expands its operations with a new ₹100 crore defence electronics manufacturing facility. The company has raised $859 million in equity funding to date and is valued at around ₹10,500 crore post-money.

Zetwerk's IPO Drive

Zetwerk is advancing its strategy for a public listing with a ₹500 crore pre-IPO funding round and the launch of a new defence electronics facility. These moves aim to strengthen its market position and valuation ahead of its Initial Public Offering.

Funding and Banking Team

Zetwerk aims to secure approximately ₹500 crore in a pre-IPO funding round, a key step in preparing for its market debut. The company has confidentially filed its draft IPO papers, appointing a syndicate of investment banks including Kotak Mahindra Capital, JM Financial, Avendus Capital, HSBC, Morgan Stanley, and Goldman Sachs. This strong advisory team points to the significant scale of Zetwerk's market entry plans. To date, the company has raised $859 million in equity funding over 19 rounds, valuing it at around ₹10,500 crore post-money.

Financials and Defence Facility

Zetwerk reported revenues of ₹12,980.7 crore for fiscal year 2025. While revenue faced pressures, net losses narrowed by 60% year-on-year to ₹370.7 crore, reflecting improved operational efficiency. The company invested ₹100 crore in a new defence electronics manufacturing facility in Devanahalli, Bengaluru. This 100,000 sq ft facility includes advanced lines for defence and automotive sectors and is expected to create about 1,200 jobs, supporting India's domestic manufacturing.

Market Context and Valuation

The expansion into defence manufacturing taps into India's drive for self-reliance. The Indian defence sector is forecast for substantial growth, with private firms expecting 16-18% revenue growth in FY26, and Goldman Sachs projecting 32% annual EPS growth for private defence companies between FY25 and FY28. This sector benefits from higher margins and government support. India's broader electronics manufacturing services (EMS) market is also expanding rapidly, projected to reach $197.8 billion by 2032. Government Production Linked Incentive (PLI) schemes are a key driver for domestic production. Publicly traded competitors like Dixon Technologies trade at P/E ratios of 35-64x, and Syrma SGS Technology at 49-78x. Zetwerk's current ₹10,500 crore valuation suggests a growth premium, with the company targeting $3 billion to $4 billion for its IPO, reflecting ambitious growth projections and its move into defence contracts.

Investor Concerns and Risks

Despite growth prospects, investors are looking closely at Zetwerk's financial health. While FY25 revenue was ₹12,980.7 crore, this marked an 11% decline from FY24's ₹14,443 crore. Net losses continue, though they have narrowed, pointing to ongoing challenges in achieving consistent profitability within the competitive contract manufacturing sector. Concerns also exist regarding the company's reliance on third-party suppliers rather than its own factories, questioning the sustainability of its asset-light model. The IPO process follows recent senior departures, including business head Josh Foulger and chief marketing officer Amrit Raj, which might indicate internal organizational shifts. Additionally, a legal dispute in the US with former executive Anirudh Reddy Edla and Ayr Energy, over alleged misuse of internal information, poses potential reputational and financial risks. Investors will need to assess these factors against the company's defence sector ambitions and its ability to generate sustainable profits.

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