Why did this transformer stock crashes by 40%; Is it worth investing in transformer sector?

India’s heavy electrical equipment sector is crucial for power generation and transmission, driven by a growing electrical equipment market valued at $72 billion in 2022. The sector is expected to grow significantly, with the overall electrical equipment market projected to expand at a CAGR of 14.3 percent from 2023 to 2028.

Price Movement 

With a market capitalization of Rs 11,665.95 crore, the shares of Transformers & Rectifiers India Ltd were trading at Rs 388.65 per share, decreasing around 5.99 percent as compared to the previous closing price of Rs 413.40 apiece.

Matter Explanation

The company hit its 52-week or all-time high in January 2025 at Rs. 650 apiece and, comparing the same with the current stock price prevailing in the market, there is a discount of approximately 40 percent.

The transformer sector is declining due to supply chain challenges, notably a shortage of CRGO steel, driving up costs and causing production delays. Market volatility and investor concerns over future demand fluctuations further contribute to the downturn, impacting overall industry stability and growth prospects.

Order Book Insights

As of December 31, 2024, the unexecuted order book stands at  Rs 3,686 crores, with  Rs 19,000 crores in inquiries under negotiation or bidding. Q3 orders totaled  Rs 631 crores, down from  Rs 1,000+ crores in Q2, reflecting a strategic focus on high-margin, favorable-payment orders.

Also read: Multibagger stock hits 5% upper circuit after FIIs bought stake worth over ₹37 Cr via bulk deal

Strategic Developments

The company achieved 100 percent backward integration by acquiring a controlling stake in a CRGO processing unit, reducing raw material costs by 4%. It secured three tech tie-ups to enhance capabilities, set for Q4 FY26, and progressed in PGCIL approval with a 500 MVA short-circuit test.

Capacity Expansion

The company’s 15,000 MVA capacity expansion project is on track for completion by February-March 2025, with order intake starting in Q1 FY26. It targets Rs 3,500 crore revenue for FY25 and aims to reach $1 billion in the next 3-4 years.

Market Position and Outlook

Management is optimistic about growth in the Indian energy sector, driven by infrastructure development. The company will adopt a selective approach to order inflow, focusing on high-yield, quick-payment projects to maximize profitability. This strategy aims to capitalize on sector opportunities while ensuring strong financial performance and sustainable growth.

Technological and Product Development

The company emphasizes its green hydrogen transformers project, now in the prototype phase, aiming for future EHV transformer market share. It continues refining its product mix to ensure sustainability, targeting EBITDA margins of 17 percent by FY27 while enhancing technological advancements and maintaining a strong growth trajectory.

Company Profile

Transformers and Rectifiers (India) Limited is an India-based company that manufactures power, furnace, and rectifier transformers. The Company is a manufacturer of a range of transformers, which provides to both the domestic and the international market.

Written by Abhishek Singh

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