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

Bengaluru-based Zetwerk is entering the public markets with a business that looks quite different from the business for which it raised capital in 2018.

The B2B contract manufacturer has moved from operating a marketplace connecting customers with third-party manufacturers to a hybrid model that combines its supplier network with its own manufacturing facilities. 

It now counts 6,979 third-party suppliers across 26 countries and operates 26 manufacturing facilities across four countries. This scale is reflected in the financials as well. 

Zetwerk’s revenue from continuing operations rose 40.4% YoY to ₹15,913 Cr in FY26. Adjusted EBITDA increased more than fourfold from ₹97 Cr in FY24 to ₹421.3 Cr in FY26. However, adjusted EBITDA margin moderated to 2.65% from 2.85% in FY25.

The startup also entered FY27 with a manufacturing order book of around ₹12,370 Cr, 43% higher than a year earlier.

But the company’s bottom line tells a different story. Zetwerk reported a consolidated loss of ₹1,606 Cr in FY26, 4.3X of ₹370.7 Cr loss incurred in the previous fiscal. The loss included an exceptional loss from continuing operations of ₹835.8 Cr and ₹453 Cr impairment from its discontinued “civil infrastructure works” operations.

The loss included an exceptional item of ₹835.8 Cr from continuing operations, primarily related to a non-cash adjustment to the conversion ratio of different classes of shares. It also included a ₹453 Cr impairment related to the discontinued civil infrastructure business. 

However, operating cash flow remained in the red. 

As Zetwerk moves towards its IPO, the bigger question is not whether the startup has grown. Zetwerk’s net operating cash outflow widened to ₹681.5 Cr in FY26 from ₹386.3 Cr in FY25, even as adjusted EBITDA crossed ₹400 Cr. 

These divergent numbers raise a critical question: Has the startup reached a point where the public market investors look past its low margins, cash burn, and reported loss to its growth prospects?

A Bigger Zetwerk Is Emerging

Zetwerk’s growth is being led by its manufacturing business.

Revenue from its manufacturing business grew 50% YoY to ₹9,374.7 Cr, accounting for 58.9%, to the top line. The remaining ₹6,538.6 Cr came from its managed marketplace and digital trade platform. Its manufacturing EBITDA margin stood at 6%, compared with 5.68% in FY25. 

The startup has also been moving into more complex manufacturing work. 

An industry expert cited that Zetwerk is bringing complex, manufacturing-heavy contracts and design and engineering capabilities in-house for select components. 

These capabilities include in-house engineering and design for certain components used in transformers for AI data centres, process plant machinery, metal manufacturing, and defence applications. At the same time, it continues to rely on third-party manufacturers for comparatively simpler products, allowing it to retain the flexibility of its asset-light supplier network.

The shift is reflected in the growing contribution of its own manufacturing facilities. GMV from in-house plants rose to around 13.9% in FY26 from 8.3% in FY25.

This also marks a shift in Zetwerk’s role in the manufacturing process. Rather than simply sourcing components against a customer’s specifications, the company is taking on greater responsibility for product design, engineering, and manufacturing under its ODM contracts.

Its exposure to energy, defence, aerospace, space, and AI infrastructure could diversify its sources of demand, though the pace at which these segments contribute materially to revenue remains to be seen. 

Energy was a key contributor to manufacturing growth in FY26, while Zetwerk is positioning AI infrastructure, aerospace, defence, and space as emerging areas of demand. 

This is also where Zetwerk’s strategy is beginning to move beyond its earlier identity as an asset-light manufacturing intermediary. Avinash Gorakshakar, founder of Avinash Mentor Research, sees this as central to the startup’s margin story. 

“Zetwerk is not attempting to become an asset-heavy manufacturer overnight. Instead, it is pursuing margin expansion by pruning low margins civil lines, deleveraging its balance sheet, taking high complexity jobs in-house, and driving volume through high margin sectors like defence, AI hardware, and overseas exports,” he said.

A Stronger Order Book, But At What Cost?

For a manufacturing startup, revenue growth alone does not tell the whole story. Zetwerk’s order book provides some visibility into future growth, but the cash required to fulfil those orders remains a concern. 

Zetwerk’s manufacturing order book stood at ₹12,370 Cr at the end of FY26, up from ₹8,629 Cr in FY25 and ₹6,170 Cr in FY24. The startup won new manufacturing orders worth ₹15,393 Cr during FY26 alone.

Over the years, it has also built a sizable base of repeat customers, who drove 80.15% of its revenue in FY26. 

An industry insider tracking Zetwerk’s business said the growing order book, particularly across manufacturing segments, gives it reasonable revenue visibility as it heads towards the IPO. 

But converting this order into profitable growth will be the bigger test. 

The gap is partly linked to working capital. As Zetwerk takes on larger manufacturing contracts, it needs to fund inventory and receivables, which can put pressure on cash flows while pulling the top line in a stronger direction. 

“A major risk associated with backing Zetwerk is that the company derives majority of its revenue from sale of products secured from third-party manufacturers. It has also been incurring continuous losses for the past three years, significant promoters and investors participation in OFS and negative operating cash flows for the past three years,” said Rahul Sharma, head of research at Equity 99, while discussing the startup’s proposed IPO. 

The supplier model adds another layer to this equation. Product sourced from third-party manufacturers accounted for over 80% of Zetwerk’s manufacturing and ecosystem segment revenue in FY26. The company reduced its revenue from the sale of products sourced from third-party suppliers from 96.51% in FY24 to 80.46% in FY26

At the same time, Zetwerk’s top 10 suppliers accounted for 38.18% of its total expenses from continuing operations in FY26. 

So, while Zetwerk has a sizable pipeline of business and is gradually reducing its dependence on third-party manufactures, it still needs significant working capital and supplier capacity to fulfill that growth. 

For investors, the order book is, therefore, a positive signal. But the bigger question is whether Zetwerk can convert that pipeline into sustainable, cash generating growth.  

Margins, Cash Flows And Valuation Will Test The IPO Case

While Zetwerk’s consolidated adjusted EBITDA margin improved to 2.65% in FY26, its manufacturing business was significantly stronger, posting a standalone adjusted EBITDA margin of 6.03%.

This puts Zetwerk in an unusual position among listed manufacturing peers. Compared with listed electronics manufacturing peers such as Dixon Technologies and Kaynes Technology, Zetwerk relies more heavily on a distributed network of third-party suppliers, although it is expanding its owned manufacturing capacity. 

If investors view Zetwerk primarily as an asset-light marketplace rather than an integrated manufacturer, it could command lower valuation multiples than peers with owned manufacturing capacity, Gorakshakar noted. 

This distinction also feeds into the debate over Zetwerk’s gross revenue recognition, with the company treating itself as the principal rather than an agent in customer contracts. 

Sharma said the accounting is appropriate as the company acts as a principal rather than an agent in its customer contracts, while Gorakshakar pointed to its fulfilment, quality-control and credit responsibilities under Ind AS 115.

Investors will also have to weigh Zetwerk’s customer and sector concentration risks. However, the company is looking to broaden its revenue mix through exposure to areas such as AI infrastructure, consumer electronics, aerospace, space and defence.

Zetwerk has also begun reshaping the business, exiting its civil infrastructure operations after recording a ₹453 Cr provision and shifting its focus towards higher-complexity manufacturing. The IPO, meanwhile, will help reduce its debt burden, with ₹1,250 Cr of the ₹2,600 Cr fresh issue earmarked for repayment at the parent company and another ₹550 Cr for borrowings at certain subsidiaries. 

While the deleveraging could lower Zetwerk’s interest burden, it does not by itself address the company’s negative cash flows. That makes the IPO valuation particularly important.

Sharma sees ₹24,000 Cr-₹28,000 Cr (about $2.5 Bn to $2.9 Bn) as a reasonable valuation range based on listed peers, while Gorakshakar believes an enterprise value-to-revenue multiple of 1.6X may be appropriate given Zetwerk’s gross revenue-recognition model. 

Ultimately, investor demand for Zetwerk’s IPO will depend on whether its revenue growth, expanding order book, and move towards higher-complexity manufacturing can outweigh concerns around thin margins, widening operating cash outflows, and continued dependence on third-party suppliers. Much will also hinge on the valuation at which the startup seeks to enter the public markets. 

Edited By Akshit Pushkarna
Creative: Abhyam Gusai

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