The business behind Zetwerk's ₹5,000 crore IPO

Akshira (0:04)

In today's episode, we'll do one deep dive and cover another story for the day. First, we'll talk about Zetwerk's rupees 5,000 crore IPO, and then we'll talk about who pays when it's too hot to work. Welcome back to The Daily Brief by Zerodha, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. I am your host Akshira. Today is Wednesday, 14th October.

Coming to the first story. So imagine you run a business that makes power transmission equipment. You have just won a big order, and you need hundreds of parts each made to precise specifications. Someone has to manufacture them. Your first option is to hire a contract manufacturer. So you agree on the specifications, the price, and the delivery schedule, and it handles production from there. It could even deliver a complete product sourcing components from other suppliers where needed. So think of companies like Dixon and Amber Enterprises in electronics and appliances. The catch is whether their manufacturing capabilities actually fit what you need.

Or you could look for suppliers on a business to business marketplace like India Mart. It'll help you find businesses that make or sell what you need, but it typically won't take responsibility for executing your order. So chasing quality, managing suppliers, and chasing deliveries could still be your headache. Now imagine a third option, a company whose entire business is organizing production across the network of factories. You handed the order, and it takes contractual responsibility for delivering the finished goods to your specifications. It can use its own plants or split the work across outside manufacturers, while it arranges materials, monitors production, checks quality, and manages delivery.

Several factories may do the work, but you only ever deal with one company.

That, in a nutshell, is Zetwerk's manufacturing business. And what it can make isn't limited to the factories it owns. It extends to the whole supplier network it manages. And on top of that, Zetwerk runs a sizable business buying and reselling industrial raw materials such as steel, aluminium, and chemicals.

And now, Zetwerk is going public. Its IPO runs from October 15th to 19th, which shares price at Rs 143 to 151 At the upper end of that band, the offer is worth about Rs 5012 crore. And of that, Rs 2830 crore goes to Zetwerk itself, and the rest goes to shareholders selling their stakes. So let's dig into how this business makes money, how much of that it gets to keep, and what the IPO money will pay for.

Let's go back to that transformer order and say it lands with Zetwerk. Its engineers study the requirements, estimate the cost, and quote a price. And once the customer agrees, Zetwerk uses its own software, Zetwerk OS, to assign the work to a suitable factory. So that factory could be one of Zetwerk's 26 factories across India, the US, Germany, and Spain, or one of its 6,979 outside suppliers. Zetwerk started out relying on other manufacturers, but has since acquired 15 factories and built 11 of its own. As of March 2026, 3 more were under construction. Either way, Zetwerk arranges the materials, monitors production, checks quality, and manages delivery. The customer pays Zetwerk, and Zetwerk in turn pays the suppliers and everyone else involved. Now, this manufacturing business spans 3 areas. The biggest is energy, which covers transformers, solar equipment, and wind turbine parts, and brought in 41% of Zetwerk's total operating income in FY26.

And then, there's precision manufacturing, which makes specialized parts for electronics, aerospace, and defense at about 9%.

The third is capital goods, meaning the machinery and equipment other industries use, which makes up another 9%.

Its customers include Siemens Gamisa, Acer India, CG Power, NTPC Denewable Energy, L&D MHI Power Boiler, DRDO, and the Indian Air Force. But why would these companies pay Zetwerk instead of just dealing directly with factories?

Because finding a supplier is only one part of the job. Factories are extremely fragmented, and individual ones can differ in quality, capacity, and how reliably they deliver. Managing those differences takes people and time, and that adds to the customer's costs. Zetwerk becomes the orchestration layer that absorbs all the complexity and guarantees the outcome. And when an order can be split across several factories working at the same time, Zetwerk can even shorten delivery times, something a standalone factory just can't do. Now, that said, how much work Zetwerk does varies from order to order. So in a build-to-print order, the customer supplies the design and specifications, and Zetwerk simply gets the product made. In an original design manufacturing or ODM order, Zetwerk takes on the design work too. And that gives it room to earn more for its contribution, though the extra work also brings extra costs and responsibilities. Now what the customer is buying also matters. Equipment bought to build a new plant counts as capital expenditure, which is a big purchase that may not come around again for years. So to keep that business going, Zetwerk has to keep finding new projects or new customers. Parts a customer needs regularly for production or maintenance are different because they can bring in repeat orders. Contract terms can add some predictability as well. Multi-year agreements can support a longer relationship, though they're only as valuable as what customers actually commit to buy. And take-or-pay agreements go a step further. The customer commits to buying a minimum volume or pays a shortfall fee if it doesn't. So how stable Zetwerk's revenue is depends partly on its mix of one-off projects, repeat purchases, and committed orders. But manufacturing made up only 59% of Zetwerk's FY26 revenue or Rs 9,375 crore. The remaining 41%, or Rs 6,539 crore, came from Terra 91, which is its arm that buys and resells industrial raw materials such as steel, aluminium, and chemicals.