CFF Fluid Control IPO: Day 2 Update & Analysis

CFF Fluid Control Limited, a niche player in India’s defense manufacturing ecosystem, launched its fixed-price SME IPO on 9th July 2025. The company seeks to raise ₹87.75 crore by offering 15 lakh equity shares at a fixed issue price of ₹585 per share. This IPO is entirely a fresh issue and aims to fund business expansion, repay debt, and meet general working capital needs.

IPO Structure and Key Dates

The IPO opened for subscription on 9th July 2025 and will close on 11th July 2025. The allotment of shares is scheduled for 14th July 2025, followed by refund initiation on 15th July 2025, and listing on the BSE SME platform on 16th July 2025.

Retail investors are required to apply in lots of 400 shares, with a minimum application size of 2 lots (800 shares) amounting to ₹2,34,000. The face value of the shares is ₹10.

Grey Market Sentiment and GMP

The Grey Market Premium (GMP) remains at ₹0 as of 10th July 2025, the second day of IPO bidding. This suggests that the market currently perceives the IPO to be fairly priced with no immediate premium expected upon listing. While GMP is only an informal indicator, it reflects short-term market sentiment and speculative interest.

A stagnant GMP for multiple consecutive days might indicate lukewarm retail enthusiasm or concern over valuations.

Subscription Status – Day 2 Insights

On Day 2, the IPO has witnessed moderate traction, particularly from Non-Institutional Investors (NIIs). As of midday on 10th July 2025, the overall subscription stands at 1.30 times.

Breakdown by category:

• Retail Individual Investors (RIIs): 0.42 times

• Non-Institutional Investors (NIIs): 2.18 times

• Qualified Institutional Buyers (QIBs): No bids recorded yet

The overwhelming participation by NIIs suggests high interest from HNIs and portfolio investors. However, retail demand remains modest. QIB activity is typically observed on the final day, and their participation will be critical in ensuring the full subscription of the offer.

Company Overview

CFF Fluid Control Limited is engaged in designing and manufacturing advanced fluid control equipment and systems primarily for the Indian Navy. It operates out of Khopoli and Pune and is part of India’s growing defense production and indigenization ecosystem.

Its key products include:

• Fluid control systems for submarines and warships

• Sonar and propulsion system components

• Customized engineering solutions for marine and defense applications

The company also partners with international defense firms, enabling it to upgrade its technological capabilities while serving strategic clients in India.

Order Book Strength

CFF’s robust order book stands at ₹551.6 crore as of the end of FY25. This includes long-term contracts and recurring orders from Defense Public Sector Units (DPSUs), providing revenue visibility over the next two to three years.

More than 90% of its business is derived from the Indian defense sector, indicating a stable yet highly specialized clientele. The upcoming Pune facility is expected to expand capacity and improve margins by streamlining manufacturing.

Financial Performance

FY 2025 Highlights

• Revenue: ₹146.10 crore

• PAT (Profit After Tax): ₹23.85 crore

• EBITDA Margin: 28.28%

• RoNW (Return on Net Worth): 16.13%

• ROCE (Return on Capital Employed): 21.84%

• ROE (Return on Equity): 17.42%

Growth Compared to FY 2024

• Revenue grew by 36.56% (from ₹106.98 crore)

• PAT increased by 39.55% (from ₹17.09 crore)

These figures suggest strong operational efficiency and the ability to convert top-line growth into consistent profitability. The EBITDA margin, nearing 30%, is indicative of cost control and product pricing strength in a niche B2G (Business-to-Government) sector.

Valuation and Technicals

• PE Ratio (Pre-IPO): 47.77

• PE Ratio (Post-IPO): 51.45

• EPS (Pre-IPO): ₹12.25

• EPS (Post-IPO): ₹11.37

• Price to Book Value: 7.71

• Market Capitalization: ₹1,226.98 crore (approx.)

While the PE multiple appears high, it’s not unusual in the defense sector, where businesses are often valued based on their strategic positioning and long-term order pipelines rather than conventional earnings ratios.

Peer Comparison

CFF Fluid Control stands as a smaller player in revenue, but boasts stronger profitability metrics than several of its larger peers. This makes it a favorable pick for investors looking at early-stage defense companies with scalable models.

Objectives of the IPO

The company has identified several key purposes for deploying the funds raised through the IPO:

• Augment working capital for ongoing and future projects

• Repayment of debt, leading to a stronger balance sheet

• Meet general corporate expenses and operational upgrades

This capital raise will allow CFF to scale operations, especially in view of its growing order book and upcoming manufacturing expansions.

Registrar and Listing Information

• Registrar: Cameo Corporate Services Limited

• Listing Exchange: BSE SME

• Tentative Listing Date: 16th July 2025

Retail and institutional investors alike must note that SME listings may have lower liquidity, making it more suitable for long-term investors with patience for price discovery.

Investment Outlook

Strengths

• Strong presence in India’s defense sector

• High EBITDA margins

• Healthy RoNW and ROCE metrics

• Strategic technology partnerships

• Expanding manufacturing footprint

Risks

• Limited retail traction could cap IPO success

• Entire revenue depends on government orders

• Flat GMP suggests low speculative demand

• Execution risks amid high-value contracts

Expert View

Analysts remain cautiously optimistic. The company’s strong financial performance and defense focus make it fundamentally sound. However, the muted retail interest and flat GMP indicate that listing gains might be minimal.

The key triggers post-listing will include:

• Fresh defense contract announcements

• Expansion progress of the Pune facility

• Institutional investor updates

• Broader sentiment in SME defense stocks

Conclusion

The CFF Fluid Control IPO enters Day 2 with moderate traction, largely supported by NII investors. While retail response is subdued and GMP stands flat, the company’s financial strength, order book visibility, and defense sector focus make it a compelling long-term bet rather than a quick listing gain play.

Investors with a long-term horizon, appetite for SME risk, and belief in India’s defense indigenization roadmap may find value in CFF Fluid Control Limited’s IPO.

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