Zetwerk's IPO Test: Can Revenue Growth Outrun Cash Flow Pressure?

Indian B2B contract manufacturer Zetwerk is gearing up for its Initial Public Offering (IPO) on the back of significant revenue growth. The company's revenue from continuing operations surged by 40.4% year-on-year to INR 15,913 crore in FY26. Adjusted EBITDA more than quadrupled to INR 421.3 crore. Zetwerk has transitioned from its initial marketplace model, connecting customers with third-party manufacturers, to a hybrid approach combining its supplier network with its own manufacturing facilities.

The company has expanded its footprint, now engaging 6,979 third-party suppliers across 26 countries and operating 26 manufacturing facilities in four countries. As of the end of the fiscal year, Zetwerk held a manufacturing order book of approximately INR 12,370 crore, marking a 43% increase from the previous year. Zetwerk is increasingly undertaking more complex manufacturing tasks, taking on greater responsibility for product design and manufacturing. The energy sector was a key driver of manufacturing growth in FY26, with the company now positioning itself in AI infrastructure, aerospace, defense, and space sectors.

However, the IPO and growth are overshadowed by the company's financial performance. In FY26, Zetwerk reported a consolidated loss of INR 1,606 crore, more than quadrupling the previous fiscal year's loss. These losses included exceptional items, such as an INR 835.8 crore adjustment related to share conversion ratios and an INR 453 crore impairment from its former civil infrastructure business.

Furthermore, operating cash flow remained negative. Zetwerk's net operating cash outflow widened to INR 681.5 crore in FY26, even as adjusted EBITDA surpassed INR 400 crore. This raises critical questions about whether investors will look past low margins, cash burn, and reported losses to focus on growth prospects. CEO of Zetwerk stated that the company is focusing on margin expansion by pruning low-margin civil lines, deleveraging its balance sheet, and concentrating on higher-margin sectors like defense and AI hardware.