Strong Debut: EMS lists at ₹282, a premium of 33.67% to IPO price

Water treatment and wastewater management company EMS made a strong debut on the bourses today, September 21, 2023. The stock listed at ₹282.05 on the NSE, a 33.67 percent premium to the issue price of ₹211. Meanwhile, on the BSE, it listed at ₹281.55, a 33.44 percent premium.

The ₹321 crore IPO was open for subscription between September 8 and September 12 at a price band in the range of ₹200-211 per share.

The issue was overall subscribed 76.21 times as the portion for qualified institutional bidders (QIBs) was booked about 150 times, while the non-institutional investors' category was subscribed to 84.39 times. The quota reserved for retail investors was subscribed to 30.55 times during the bidding process.

The issue comprised of a sale of fresh equity shares amounting to ₹146.24 crore and an offer-for-sale (OFS) of up to 82.94 lakh equity shares amounting to ₹175 crore by promoter Ramveer Singh. Proceeds from the fresh issue will fund working capital requirements and other general corporate purposes. The company will not receive any proceeds from the OFS portion.

Incorporated in December 2010, EMS is engaged in the business of providing water and wastewater collection, treatment, and disposal services for government authorities and local bodies. It has its own civil construction team and employs over 57 engineers, supported by third-party consultants and industry experts. The company has executed 67 projects over the past 13 years and has an order book of ₹1,775 crore. Most of its projects have been executed across Bihar, Uttarakhand, Madhya Pradesh, Rajasthan and Haryana.

For the year ending March 2023 (FY23), the company's net profit rose over 37 percent to ₹108.62 crore, compared to ₹79.04 crore in FY22. Meanwhile, its total revenue from operations jumped 49.5 percent to ₹538.16 crore for FY23 against ₹359.85 crore for FY22.

Over FY20-23 as well, EMS reported a healthy financial profile characterised by robust profitability and lower debt on the balance sheet. EMS posted an 18.2 percent CAGR rise in consolidated operating revenue while consolidated EBITDA increased by 15.8 percent in this period. However, the EBITDA margin contracted by 181bps during the period and reported PAT increased by 14.1 percent CAGR during FY20-23.

Most brokerage firms had recommended subscribing to the issue on the back of its growth potential and infra-based niche business model, strong fundamentals and healthy financials. However, negative cash flows, heavy dependence on government projects and working capital requirements were some key risks for the firm.