The curious case of Spray Engineering Devices Limited
Here's something that doesn't make sense at first glance.
You have a company with over 100 patents. It's working with India's biggest business houses — Bajaj, Birla, Dalmia. It has an order book of Rs 800 crore. And yet, 60% of its money is stuck with customers for more than 6 months.
Welcome to the world of Spray Engineering Devices Limited (SEDL), a company that's engineering India's green energy transition but can't seem to get its cash on time.
Think about sugar mills. Now think about making them energy-efficient. That's SEDL.
Founded in 2004 by Vivek Verma and Prateek Verma, the company started by making spray nozzles for sugar mills. Today, it's evolved into something much bigger. It manufactures equipment for sugar production, ethanol plants, water treatment, and biofuels.
The company has three manufacturing units in Baddi, Himachal Pradesh, and serves clients across India and abroad.
But here's what makes SEDL interesting. It's not just selling equipment. It's selling innovation.
SEDL has 60 engineers in its R&D department who've been working for 20-25 years on a single mission: How do you make industrial processes more energy-efficient?
The result? Over 100 patents.
Their flagship technology is something called the Low Temperature Evaporator (LTE). Without getting too technical, it drastically cuts down the steam needed in sugar and ethanol production. Less steam means less energy. Less energy means lower costs and lower emissions.
They've also developed India's first viable boiler-less sugarcane plant in Assam. Yes, you read that right. A sugar plant without a boiler.
And they're not stopping there. SEDL recently partnered with Jakson Green to build India's first 4G ethanol plant. That's ethanol produced from industrial gases, not crops. It's cutting-edge stuff.
So why is a company with this kind of tech innovation struggling with something as basic as collecting payments?
Let's talk about how SEDL makes money.
The company gets orders from sugar mills and ethanol manufacturers. These aren't small orders. The average sugar or ethanol project is worth Rs 35-40 crore. A water treatment order is smaller, around Rs 5-6 crore.
Now here's where it gets tricky.
A typical sugar or ethanol project takes 5-6 months to complete. Water treatment projects are faster at 60 days. But completing the project doesn't mean SEDL gets all its money.
When SEDL delivers a project, the customer pays 85-90% of the amount. The remaining 10-15%? That's held back as "retention money."
Why? Because customers want to make sure everything works perfectly. So they keep this money for 1-2 years as insurance. Only after the "defect liability period" expires do they release it.
This is standard practice in engineering projects. But it creates a massive working capital problem.
Imagine you complete a Rs 40 crore project. You get Rs 34 crore upfront. But Rs 6 crore is stuck for the next two years.
Now multiply this across dozens of projects. Suddenly, you have hundreds of crores locked up, waiting to be released.
This is exactly what happened to SEDL. In FY2025, 60% of the company's receivables were outstanding for more than 6 months. Not because customers weren't paying. But because of this retention money system.
And this creates a vicious cycle. You need money to fund new projects. But your money is stuck with customers. So you have to borrow from banks. Which means interest costs. Which eats into profits.
The numbers tell the story. SEDL's revenue fell from Rs 547 crore in FY2024 to Rs 461 crore in FY2025. Profit margins collapsed from 9.7% to just 3.3%.
But wait. There's more.
SEDL's contracts are fixed-price. Meaning, whatever price they quote at the start, that's what they get. No price adjustments allowed.
Now, 70-75% of their raw material is steel. And steel prices? They fluctuate wildly based on global demand and supply.
So if steel prices spike after you've signed a contract, you're stuck. Your costs go up, but your revenue stays the same. Your margins get squeezed.
This is exactly what contributed to the margin collapse in FY2025. Lower revenues, higher costs, and money stuck with customers. Not a great combination.
But here's where the story gets interesting.
In the first half of FY2026, something changed. SEDL reported revenues of Rs 346 crore in just six months. That's 63% of the entire previous year's revenue.
Operating margins bounced back to 15.2%. Profit margins recovered to 9.3%. The company generated Rs 32 crore in profit in six months, compared to just Rs 15 crore for the entire previous year.
What happened?
Two things. First, delayed export orders finally got executed. Second, the company improved its project execution efficiency.
But more importantly, the tailwind behind SEDL's business just got stronger.
India has an ambitious target: 20% ethanol blending in petrol by 2025-26.
To put this in perspective, India's sugar production in the current season (till December 31, 2025) is up 25% year-on-year. The government allocated 289 crore litres of ethanol from the sugar sector for this year.
Sugar mills are scrambling to set up ethanol plants. And they need SEDL's technology to do it efficiently.
Remember those 100+ patents? They're not just nice to have. They're essential for sugar mills trying to maximize ethanol output while minimizing energy consumption.
SEDL is also moving beyond traditional ethanol. With LanzaTech (a US microbiology firm), they're developing second-generation (2G) ethanol from agricultural waste. With Jakson Green, they're pioneering fourth-generation (4G) ethanol from industrial gases.
This positions SEDL at the intersection of India's energy security and sustainability goals.
Despite the cash flow issues, SEDL's balance sheet is surprisingly healthy.
The company's debt-to-equity ratio is just 0.4x. That's very low. It can cover its interest payments 9.9 times over from its operating profits. And it has cash reserves of Rs 4 crore plus undrawn credit lines of Rs 8.85 crore.
Total debt repayment due this year? Just Rs 3.55 crore. Easily manageable.
The company also maintains modest capital expenditure plans of Rs 4-5 crore annually, funded entirely from internal cash generation. No need for aggressive borrowing.
This is why ICRA reaffirmed its BBB+ (Stable) rating for SEDL's long-term debt and A2 rating for short-term debt.
But ICRA also flagged the concerns: stretched receivables, margin vulnerability to raw material prices, and the working capital-intensive nature of the business.
So should you pay attention to SEDL?
On one hand, the company operates in high-growth sectors with strong government support. Its technology leadership gives it pricing power. The Rs 800 crore order book provides revenue visibility for 15-18 months.
On the other hand, the working capital cycle is brutal. Margins are vulnerable to commodity price swings. And revenue can be lumpy depending on project completion timelines.
SEDL is not a high-growth, high-margin business. It's a steady, execution-driven company with genuine technological advantages in a sector poised for expansion.
The real test will be whether it can convert that Rs 800 crore order book efficiently while managing its cash flow better. If it does, the recovery we saw in H1 FY2026 could sustain. If not, it'll continue to struggle despite having some of India's best industrial technology.
For now, it remains a company with brilliant engineering but challenging economics. A reminder that innovation alone doesn't guarantee smooth sailing. Execution and cash flow management matter just as much.
Maybe even more.
Source: ICRA Rating Report (December 26, 2025), Company disclosures, Industry reports
