📌 At a Glance
CFF Fluid Control Ltd is diving into the SME market again with an ₹87.75 Cr fixed price FPO at ₹585/share. It’s all fresh issue — no OFS drama here. Their business? Critical submarine machinery, weapons systems, air control units, and defense PSU love. They already listed in 2023 and now want to refuel. Revenues up 37%, PAT up 40%, and order book at ₹514 Cr+. But is it an FPO or just a submarine-shaped IPO rerun?
1. 🛠️ WTF Do They Even Do?
- Builds and services complex fluid control systems for submarines
- Caters primarily to Indian defense shipyards (Mazagon Dock, etc.)
- Product suite includes:
- Weapon handling & control systems
- Steering gear + propulsion kits
- Breathing and diving air units
- High-pressure air and hydraulic systems
- Strong Moat: Defense = High Entry Barriers
- Tied up with Atlas Elektronik GmbH (Germany) & Nereides (France) for sonar systems
📦 Specialty hardware in a niche ₹💣 segment
2. 💸 Financials – Profit in Defense? Rare but Real.
| ₹ Cr | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue | 71.10 | 106.98 | 146.10 |
| EBITDA | 18.83 | 30.85 | 41.31 |
| PAT | 10.14 | 17.09 | 23.85 |
| PAT Margin | 14.3% | 16.0% | 16.4% ✅ |
| EBITDA Margin | 26.4% | 28.8% | 28.4% ✅ |
| Net Worth | 24.99 | 125.94 | 147.84 |
| Debt | 45.90 | 23.48 | 21.11 |
🧠 TL;DR:
- 💥 Revenue CAGR (FY23–FY25): ~42%
- 💰 PAT CAGR (FY23–FY25): ~50%
- ✅ Margins are elite
- 🔻 Debt dropped significantly
This submarine is not just floating, it’s torpedoing profits.
3. 🧮 Valuation – Is ₹585 a Depth Charge?
- Issue Price = ₹585
- FY25 EPS = ₹11.37
- P/E = 51.45x ❗
- Market Cap (Post-FPO) = ₹1,226 Cr
- ROE = 17.4%, ROCE = 21.8%
🧠 EduInvesting FV Range™: ₹380 – ₹460
At ₹585, this is a premium submarine.
Yes, defense deserves a premium… but this is SME, not BEL or HAL.
4. 🚀 What’s Cooking?
- Order Book: ₹514 Cr+ (That’s 3.5x FY25 revenue) ✅
- ₹72.6 Cr for working capital = scaling needs cash
- ₹8.34 Cr = General Corp Purpose
- Second plant in Chakan under construction
- Execution risk exists — Lump-sum defense contracts can be lumpy
- Global tie-ups = credibility booster
- But no anchor investors = institutions probably priced out
5. 📊 Balance Sheet – Steady or Stressy?
- Net Worth: ₹147.84 Cr
- Borrowing: ₹21.11 Cr
- D/E Ratio: 0.14 = Excellent
- Reserves: ₹128.37 Cr
- No dividends — which is fine, they’re in expansion mode
Verdict: Balance sheet is 👌 clean, lean, and submarine-themed.
6. 💵 Cash Flow – Float or Freeze?
- EBITDA margins = cash-rich biz
- Revenue + PAT compounding
- ₹72 Cr working capital ask = business likely receivables-heavy
- No major red flags in operations
- FPO funds will help smoothen project cycles & reduce dependency on debt
7. 📐 Ratios – Are the Valuation Torpedoes Armed?
| Metric | Value | Verdict |
|---|---|---|
| ROE | 17.42% | ✅ Strong |
| ROCE | 21.84% | ✅ Strong |
| PAT Margin | 16.39% | ✅ Elite |
| EBITDA Margin | 28.38% | 💥 Impressive |
| D/E Ratio | 0.14 | ✅ Very Low |
| P/E Ratio | 51.45x | 🔺 Very High |
| P/B Ratio | ~8.3x | Also high |
It’s priced like a future PSU monopoly, not an SME defense supplier. 🚨
8. ⚔️ Peer Comparison – Who Else Builds Naval Guts?
| Company | P/E | ROE | Margins | Segment |
|---|---|---|---|---|
| CFF Fluid Control (FPO) | 51.4x | 17.4% | 28.4% EBITDA | Submarine Systems |
| Zen Tech | ~95x | ~19% | ~30% | Defense Simulators |
| MTAR Tech | ~55x | ~14% | ~25% | Precision Engg |
| Paras Defense | ~75x | ~13% | ~22% | Optics/Avionics |
📦 CFF has solid fundamentals. But the valuation is already in Zen–MTAR territory. Question is: can SME investors absorb this?
9. 🧑💼 Shareholding – Who’s Steering the Ship?
Promoters:
- Sunil Menon
- Gautam Makker
- Pre-FPO Holding: 73.31%
- Post-FPO Holding: 68.06%
✅ No OFS — clean FPO
✅ Promoters still holding majority
📉 Dilution is moderate (~5.25%)
10. 🧑⚖️ EduInvesting Verdict™
“This company literally builds India’s submarine hearts. But this FPO is priced like it’s HAL + Tesla + PSLV rolled into one.”
✅ Pros:
- Niche, defense-only segment
- High order book visibility
- Debt-free, margin-rich business
- Long-term strategic partners abroad
- IPO track record clean (listed in 2023)
🚨 Cons:
- Valuation too salty
- SME platform = low liquidity post-FPO
- Defense execution risk (payment delays, policy risk)
- No anchor = no big player confidence
🎯 Fair Value Range: ₹380 – ₹460/share
📦 FPO Price: ₹585 = premium-grade optimism
Unless defense FOMO kicks in, listing pop might get torpedoed by valuation.
✍️ Written by Prashant | 📅 July 7, 2025
Tags: CFF Fluid Control FPO, submarine parts SME, defense manufacturing IPO, Aryaman FPO, Khopoli submarine factory, BSE SME IPO, EduInvesting review, sonar systems FPO, Zen Tech peer, SME FPO analysis
