The initial public offer (IPO) of EMS Limited (EMSL) opened for subscription on Friday, September 8. The three-day bidding process will conclude on Tuesday (September 12). Ahead of the issue opening, the sewerage solution provider mopped up Rs 96.37 crore via anchor book.

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NAV Capital VCC - NAV Capital Emerging Star Fund, Abakkus Diversified Alpha Fund, Saint Capital Fund, Meru Investment Fund PCC - CELL 1, BofA Securities Europe SA - ODI, and Morgan Stanley Asia (Singapore) Pte are the anchor investors. The participation of six investors helped the anchor book get fully subscribed.

EMS Limited has fixed a price band of Rs 200-211 per share, and investors can bid for a minimum of 70 shares in one lot and in multiples thereafter.

Shares of the company were commanding a premium of Rs 125 in the unlisted market on September 8. The grey market is an unofficial market wherein the IPO shares can be bought and sold till the listing.

Should you apply or not?

Analysts have a 'Subscribe' recommendation to the IPO considering the company has a robust order book. It also has a strong in-house designing, engineering and execution team. They have a strong execution capability with industry experience.

Anand Rathi: Subscribe

According to Anand Rathi, the issue is reasonably priced and they have a 'Subscribe' rating to the IPO.

"At the upper price band company is valuing at P/E (price-earnings) of 10.7 times FY23 earnings with a market cap of Rs 11,717 million post issue of equity shares and return on net worth of 22.31 percent," the brokerage said.

Stoxbox: Subscribe

Assigning a 'Subscribe' rating to the issue, the brokerage said, "EMS has successfully completed 67 projects as of July 31, 2023, and gradually intends to expand its business operations to other regions of the country, especially North-East and South India. Almost all of the company’s projects are World Bank-funded through local state government bodies. This is the main reason for their robust cash flows/timely payments, and no bad debts, which helps them to take on more projects with the help of internal accruals only. As a result, there are savings in the finance cost which helps to improve the profit margin."

"On the upper price band, the issue is valued at a P/E of 9.1 times based on FY23 earnings, which we feel is fairly valued compared to its peers."

About the offer

The IPO comprises a fresh issue of equity shares, aggregating up to Rs 146 crore, which was cut from Rs 180 crore earlier, by EMSL and an offer for sale (OFS) of up to 82.94 lakh equity shares.

Under the OFS, promoter and founder Ramveer Singh will sell 82.94 lakh shares. Singh currently holds a 97.81 percent stake in the company.

The company will not receive any proceeds from the OFS by the promoter and selling shareholder and the proceeds received from the OFS will not form part of the net proceeds. The promoter and selling shareholder will be entitled to the proceeds of the OFS after deducting his proportion of issue expenses and relevant taxes thereon.

The net proceeds from the issue will be utilised for funding of working capital requirements of EMSL; and general corporate purposes.

About 50 percent of the issue has been set aside for qualified institutional buyers, 15 percent for non-institutional investors and the remaining 35 percent for retail investors.

Khambatta Securities is the sole book-running lead manager to the issue, while KFin Technologies is the registrar.

Financials

On the financial performance front, for the last three fiscals, EMSL has on a consolidated basis posted a total revenue and a net profit of Rs 336.18 crore and Rs 71.91 crore in FY21, Rs 363.10 crore and Rs 78.93 crore in FY22, and Rs 543.28 crore and Rs 108.67 crore in FY23.

EMSL's PAT margins were 21.76 percent in FY21, 21.97 percent in FY22, and 20.18 percent in FY23 as well and its RoE (return on equity) were 23.83 percent, 20.79 percent, and 22.27 percent for the said periods, respectively.

Company overview

EMS is in the business of sewerage solution providers, water supply systems, water and waste treatment plants, electrical transmission and distribution, road and allied works, operation and maintenance of wastewater scheme projects (WWSPs) and water supply scheme projects (WSSPs) for government authorities and bodies.

The company bids for tenders issued by CPWD, state governments and Urban Local Bodies (ULBs) for developing WWSPs and WSSPs on an EPC or HAM basis.

The company has an in-house team for designing engineering and construction, which makes them self-reliant on all aspects of their business. The company have a team of 61 engineers who are supported by third-party consultants and industry experts to ensure compliance and quality standards laid down by the industry and government agencies and departments.

First Published:Sept 8, 2023 10:14 AM IST