Top Mutual Funds
Enviro Infra Engineers Limited IPO
November has been a busy month for investors. The last IPO we cover for this month (we don't have anything confirmed but things can change!) is Enviro Infra Engineers Limited (EIEL), a company engaged in the design, construction, operation, and maintenance of water and Waste-Water Treatment Plants (WWTPs) and water supply projects (WSSPs) for government agencies/entities.
The IPO opens for subscription on 22nd November and closes on 26th November. Let us look at the various aspects of EIEL's business to help you decide whether to subscribe or invest in the IPO.
Below are the key details related to the EIEL IPO:
- Issue Size: Rs 650.43 crore
- Price Band: Rs 140 - Rs 148
- Lot Size: 101 Shares
- Issue Details: Fresh Issue of Rs 572.46 crore + Remaining Offer for Sale (OFS)
- Market Cap: At the upper price band, Rs 2597.84 crore
- Retail Share Offered: 35%
- Minimum Investment: Rs 14,948
Enviro Infra Engineers IPO: The Business
EIE is in the business of designing, constructing, operating, and maintenance of Water and Wastewater Treatment Plants (WWTPs) and Water Supply Scheme Projects (WSSPs) for government authorities/bodies. WWTPs include Sewage Treatment Plants (STPs), Sewerage Schemes (SS), and Common Effluent Treatment Plants (CETPs) while WSSPs include Water Treatment Plants (WTPs) along with pumping stations and laying of pipelines for the supply of water.
WWTPs and WSSPs are partly funded by the Central Government under schemes like the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and fully funded under the National Mission for Clean Ganga (NMCG) for projects in urban areas.
They bid for tenders issued by State Governments and ULBs for developing WWTPs and WSSPs on an EPC or HAM basis. As of June 30, 2024, they have successfully developed 28 WWTPs and WSSPs across India in the past seven years which includes 22 projects with 10 MLD capacity and above.
The company has an in-house team for designing, engineering, and construction which makes them self-reliant on all aspects of the business. They have a team of 180 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 & departments.
Enviro Infra Engineers IPO: Industry Overview
The demand for Water Treatment accounted for over $146.60 billion in 2023 and is expected to grow at a CAGR of 6.89% in the forecast period.
Here are growth numbers across verticals:
- Based on equipment, the Disinfection segment is expected to have a major share in the water and wastewater treatment market with a CAGR of 5.99% in terms of value. Disinfection equipment plays a critical role in eliminating harmful pathogens, bacteria, viruses, and other contaminants from water and wastewater streams.
- The demand for Process Control and Automation accounted for over USD 93.57 Billion in 2022 and is expected to grow at a CAGR of 6.07% in the forecast period.
- The demand from the Industrial sector accounted for over USD 58.48 Billion in 2023 and is expected to grow at a CAGR of 6.50% in the forecast period.
- Based on end-use, the municipal segment is expected to have a major share in the Water and Wastewater Treatment market with a CAGR of 6.04% in terms of value.
Enviro Infra Engineers IPO: Listed Peers
The company has four listed peers - EMS, ION Exchange, Va Tech Wabag, and Vishnu Prakash R Punglia. In this section, we look at the financial performance of all five companies to give you some idea of where EIEL stands among its peers. Here are the numbers (FY24):
- In terms of total income (revenue), Va Tech is the largest player, followed by ION Exchange and Vishnu Prakash. Enviro has the lowest revenue among its peers.
- The earning per share (EPS) is highest for Va Tech Wabag (Rs 39.49), followed by EMS (Rs 29.38). EIEL again has the lowest EPS.
- EIEL has the highest Return on Net Worth (RoNW) of 37.83%, much higher than ION Exchange (19.23%) and EMS (19.09%).
For exact numbers, check the below table.
Enviro Infra Engineers IPO: Financials
Let us now look at the financial numbers of EIEL Green in the recent years:
- Enviro Infra reported a revenue of Rs 223.52 crore, Rs 338.10 crore, and Rs 728.92 crore for FY22, FY23, and FY24, respectively. The revenue has grown at a CAGR of 80.60% in this period.
- The EBITDA for FY22, FY23, and FY24 were Rs 50.02 crore, Rs 81.69 crore, and Rs 169.32 crore, respectively. The EBITDA margins for the same period were 22.38%, 24.16%, and 23.23%, respectively.
- The company has posted a net profit of Rs 34.55 crore for FY22, Rs 54.98 crore for FY23, and Rs 220.54 crore for FY24. The PAT margins for the same period were 15.46%, 16.26%, and 15.17%, respectively.
- For the last three financial years, the company has reported an average EPS of Rs 5.95 and an average RoNW of 41.44 %.
- If we attribute annualized FY25 super earnings to a post-IPO fully diluted equity base, then the asking price is at a P/E of 21.67, and based on FY24 earnings, the P/E stands at 23.90.
- Net Debt to Equity ratio has increased from 0.25 in FY22 to 0.80 in FY24.
- The number of projects has increased from four (4) in FY22 to eleven (11) in FY24.
Enviro Infra Engineers IPO: Competitive Strengths
Below are some of the company's strengths:
- They have an in-house design, engineering, and execution team.
- EIEL has an increasing presence in existing geographies with new projects.
- They have a diversified Order Book of projects across India.
- The company has in-house execution capabilities with timely delivery and an established track record enabling consistent increase in eligibility for high-value project tenders.
Enviro Infra Engineers IPO: Risks
Below are the risks associated with their business:
- Any reduction in budgetary allocation to the sector in which EIEL may affect the number of projects that the government authorities/bodies may plan to develop in a particular period. The business is directly and significantly dependent on projects awarded by them.
- Their projects are awarded through the competitive bidding process by government authorities/bodies. They may not be able to qualify for, compete, and win future projects, which could adversely affect the business and results of operations.
- They rely on their in-house designing, engineering, and construction teams for project execution. Loss of employee(s) may have an adverse effect on the execution of the projects.
- Their business is working capital intensive. If they experience insufficient cash flows to meet required payments on the working capital requirements, there may be an adverse effect on the business.
