SEDEMAC Mechatronics IPO

SEDEMAC Mechatronics Limited is a technology-driven automotive and industrial electronics company with a strong focus on embedded control systems. The company was originally incorporated as SEDEMAC Mechatronics Private Limited on July 18, 2007, under the Companies Act, 1956. In 2024, the company transitioned into a public limited entity and adopted its current name, marking a key milestone ahead of its IPO journey.

Company Background and Evolution

SEDEMAC was founded with a clear objective: to design and manufacture indigenous electronic control units (ECUs) for engines and power systems. Over the years, the company expanded its engineering depth and product range, moving from basic control modules to complex mechatronic solutions.

The company has steadily built capabilities in:

• Embedded hardware design

• Firmware and software development

• Calibration and validation

• End-to-end product lifecycle support

Registered Office and Location

SEDEMAC’s registered and corporate office is located in Pune, Maharashtra, one of India’s largest automotive and engineering hubs.

Registered & Corporate Office Address

Industry and Sector

• Industry: Automotive Components & Industrial Electronics

• Sector: Auto Ancillaries / Electronic Systems

• Sub-segment: Engine control systems, power electronics, mechatronics

Products and Services Overview

SEDEMAC primarily designs and supplies:

• Engine Control Units (ECUs)

• Generator control modules

• Power electronics and controllers

• Embedded software and system solutions

The company operates as a technology partner to OEMs rather than a commodity supplier, which allows for higher entry barriers and longer customer relationships.

SEDEMAC operates within the automotive electronics and control systems industry, which has seen rapid growth due to rising emission norms, fuel efficiency requirements, and increasing electronic content in vehicles and machines.

Industry Size and Growth Trends

The Indian automotive electronics market has grown at a faster pace than the overall automotive sector. This growth is driven by:

• Transition from mechanical to electronic controls

• Stringent emission norms (BS-VI and beyond)

• Increased adoption of digital and smart controllers

Indicative Industry Growth Drivers

Regulatory Landscape

The industry is heavily influenced by:

• BS-VI emission norms

• Automotive safety and efficiency standards

• Import substitution policies

These regulations increase the demand for customised electronic control solutions, directly benefiting companies like SEDEMAC with strong R&D capabilities.

Future Outlook

The long-term outlook remains positive due to:

• Continued tightening of emission norms

• Growing demand for electronically controlled engines

• Expansion of electronics into non-automotive engines such as generators and power tools

SEDEMAC is engaged in the design, development, and supply of control solutions used in engines and power systems. The company’s offerings go beyond hardware and include firmware, calibration, and validation services.

What the Company Does

At its core, SEDEMAC helps OEMs:

• Control engine performance

• Improve fuel efficiency

• Reduce emissions

• Meet regulatory standards

Product Categories

Target Customers

SEDEMAC primarily serves:

• Automotive OEMs

• Engine manufacturers

• Generator and power equipment manufacturers

Position in the Value Chain

The company operates upstream in the value chain, working closely with OEMs during the design phase. This leads to:

• Long development cycles

• High switching costs

• Stable multi-year revenue relationships

SEDEMAC operates in a highly regulated environment. Compliance is not optional; it is a core part of its business model.

Major Applicable Regulations

Industry-Specific Standards

• Automotive electronics safety standards

• Engine emission compliance norms

• Quality certifications mandated by OEMs

Strict adherence to these regulations enhances customer trust and reduces execution risk.

Investing in SEDEMAC involves several risks, which are clearly disclosed in the RHP.

Key Business Risks

Financial and Operational Risks

• Working capital intensity

• Exposure to delays in OEM project approvals

• Dependence on skilled engineering talent

These risks are typical for a technology-led auto ancillary company, but they require continuous monitoring.

SEDEMAC is promoted by a group of technocrats and professionals with deep experience in engineering and product development.

Promoters of the Company

Role of Promoters

The promoters have been actively involved in:

• Product vision and R&D strategy

• Customer engagement

• Long-term business planning

Their continued involvement provides stability and strategic continuity.

SEDEMAC has relationships with certain group and associate entities, mainly for:

• Investment holding

• Strategic partnerships

These entities do not materially dilute operational control but are disclosed for transparency and regulatory compliance.

The company is led by a professional management team supported by experienced engineers and finance professionals.

Key Managerial Personnel

The leadership team combines technical depth with financial discipline, which is critical for a product-centric company.

SEDEMAC follows a structured corporate governance framework aligned with SEBI and Companies Act requirements.

Board Structure

• Executive Directors

• Independent Directors

• Non-Executive Directors

Key Board Committees

Strong governance practices enhance investor confidence, especially in a first-time public issue.

SEDEMAC Mechatronics Limited, along with its promoters and directors, is subject to certain ongoing and past legal proceedings, as disclosed in the RHP. These matters are typical for a company of its size and operational scale and primarily relate to commercial, tax, and employment-related disputes.

Nature of Legal Proceedings

As per the RHP, none of the litigations individually or collectively are expected to materially affect the company’s business operations or financial position. However, investors should note that adverse outcomes in legal proceedings could have financial implications.

SEDEMAC operates in a regulated industrial and automotive environment. The company has obtained all material licenses and approvals required to conduct its business lawfully in India.

Key Statutory Approvals

The RHP confirms that no material approvals are pending, and any approvals that may lapse can be renewed in the ordinary course of business.

SEDEMAC’s financials are presented in the RHP as restated financial information prepared in accordance with Indian Accounting Standards (Ind AS).

Reporting Period Covered

• FY 2023

• FY 2024

• FY 2025

• Stub period ended June 30, 2025

Key Observations (Qualitative)

• Revenue growth driven by higher ECU and controller deployments

• Stable operating margins supported by engineering-led product mix

• Increasing investment in R&D and product development

• Balance between profitability and growth-stage reinvestment

SEDEMAC has availed working capital facilities and term borrowings to support its operations, R&D investments, and manufacturing scale-up.

Nature of Borrowings

The RHP indicates that the company’s borrowings are secured and unsecured, depending on the facility, and are serviced regularly without any material defaults.

The company generates cash primarily from operating activities, while cash outflows are linked to product development, testing infrastructure, and technology investments.

Cash Flow Structure

SEDEMAC’s cash flow pattern reflects a technology-centric manufacturing business, where upfront investments precede long-term customer revenues.

Management’s discussion in the RHP highlights both achievements and challenges faced by SEDEMAC.

Management’s View on Performance

• Strong demand for electronic control solutions

• Increasing acceptance of indigenously developed ECUs

• Improved customer engagement across OEM segments

Key Strategic Focus Areas

Management believes the company is well-positioned to benefit from stricter emission norms and rising electronic content in engines and machines.

This IPO is structured as a 100% Offer for Sale (OFS).

Use of Proceeds

• No funds will be received by the company

• Entire proceeds will go to the selling shareholders

Implication for Investors

• IPO does not directly strengthen the company’s balance sheet

• Provides partial exit and liquidity to existing investors

• Public listing improves transparency and market visibility

The issue price will be determined through the book-building process, in consultation with the book-running lead managers.

Valuation Considerations

The RHP clearly states that the offer price should not be considered indicative of post-listing market price, and actual trading prices may vary.

SEDEMAC’s share capital structure includes equity shares and compulsorily convertible preference shares (CCPS), which will convert into equity prior to listing.

Capital Structure Overview

Statement of Profit and Loss (₹ in million)

Insight:
SEDEMAC shows consistent revenue growth, expanding margins, and improving profitability, driven by higher ECU volumes and better product mix.

Balance Sheet Snapshot (₹ in million)

Insight:
Net worth has grown steadily, while borrowings have reduced, indicating strong internal cash generation.

Cash Flow Summary (₹ in million)

Insight:
Operating cash flows are robust and comfortably fund capital expenditure and debt servicing.

Since this is a 100% Offer for Sale, the total share capital remains unchanged.

Post-IPO Shareholding Structure

Promoters continue to retain majority ownership, which aligns long-term interests with public shareholders.

SEDEMAC follows a balanced dividend policy, aiming to:

• Reward shareholders

• Retain earnings for growth and R&D

Key Dividend Considerations

• Profitability and cash flows

• Capital expenditure requirements

• Regulatory and contractual restrictions

The company has not committed to a fixed payout ratio, which is typical for a technology-focused growth company.

SEDEMAC has entered into related party transactions, mainly involving:

• Promoters

• Group entities

• Key managerial personnel

Nature of Transactions

All transactions are conducted at arm’s length and disclosed as per Ind AS requirements.

Important agreements related to the IPO include:

• Shareholders’ Agreement

• Registrar agreement

• Book Running Lead Manager agreements

• Cash escrow and sponsor bank agreements

These contracts govern rights, obligations, and issue mechanics.

IPO Structure

Investor Allocation

Equity shareholders are entitled to:

• Voting rights (one vote per share)

• Dividend rights, if declared

• Participation in surplus assets on liquidation

• Transferability of shares

These rights are governed by the Companies Act, 2013 and the company’s Articles of Association.

SEDEMAC has complied with:

• SEBI ICDR Regulations

• Companies Act disclosures

• Accounting and audit standards

• Corporate governance norms

No material non-compliance has been reported in the RHP.

Profitability, Liquidity & Leverage Ratios

Profitability Ratios

*ROE calculated on average net worth for the year.

What this tells investors:
SEDEMAC shows steady margin expansion and improving capital efficiency, a strong signal for a technology-led auto ancillary company.

Liquidity Ratios

Interpretation:
Liquidity has improved every year, indicating better working capital management and lower short-term financial stress.

Leverage Ratios

Interpretation:
Debt is coming down while earnings are rising. This is a very positive pre-IPO signal, especially since this IPO is a 100% OFS.

Ratio Trend Snapshot (Investor-Friendly)