Water and wastewater treatment solutions provider Concord Enviro Systems is set to debut on the bourses, effective December 27. Analysts remain cautious on the company considering the inconsistency in financial performance, and divided in their opinion on the expected stock performance, though its public issue received decent demand from investors.
The Rs 500-crore initial share sale was subscribed 10.67 times during December 19-23, with qualified institutional buyers picking 17.32 times their reserved portion. Non-institutional and retail investors bid 14.2 times and 5.56 times their allotted quotas.
The issue is currently trading at a premium of over 8 percent of its upper price band of Rs 701 per share in the grey market (an unofficial market for trading in IPO shares till the listing), "reflecting low investor confidence", Sagar Shetty, Research Analyst at StoxBox said.
He also remains cautious on the company given its inconsistent financial performance, which is further underscored by the negative operating cash flow in FY24. Concord Enviro reported 655.2 percent on-year increase in net profit at Rs 41.4 crore for the fiscal 2024, but in the fiscal 2023, the profit was down by 66.7 percent to Rs 5.5 crore compared to previous fiscal 2022. Revenue in the year ended March 2024 at Rs 497 crore increased by 44.8 percent, compared to previous fiscal, but the profit in FY23 was up by just 4 percent to Rs 343.2 crore compared to fiscal 2022.
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Further, in the five-month period ended August 2024, the profit was just at Rs 0.5 crore on revenue of Rs 206.2 crore.
According to Sagar Shetty, additional concerns arise from the aggressive dilution of promoter holdings post-listing. "For those who have been allocated shares, we advise booking profits if there is a premium listing and closely tracking the company's performance in future quarters," he said.
Concord Enviro Systems, which competes with VA Tech Wabag, Triveni Engineering, Praj Industries, Ion Exchange, and Thermax, provides water and wastewater treatment and reuse solutions, including zero liquid discharge (ZLD) technology. It generates revenue from sale of systems and plants, operations and maintenance of installed plants, and supplying consumables and spares for installed plants.
As of August 2024, it serviced over 289 domestic customers and 21 international customers including Diageo Mexico Operaciones, S.A. De C.V, Grasim Industries, AB Mauri, Anthem Biosciences, Bhopal Glues and Chemicals, Kasyap Sweetners, LANXESS India, Puja Spintex, SFC Environmental Technologies, SMS, and Tagros Chemicals India.
At the upper price band company is valuing at P/E of 35.01x, with an EV/EBITDA of 22.1x and market cap of Rs 1,450.8 crore post issue of equity shares and return on net worth of 12.92 percent.
Narendra Solanki, Head Fundamental Research-Investment Services at Anand Rathi Shares and Stock Brokers suggests investors to hold the stock for long term.
Mumbai-based Concord Enviro Systems has raised Rs 175 crore via fresh issue, and Rs 325.3 crore through offer-for-sale. The fresh issue proceeds will be utilised for the greenfield project in UAE, the brownfield project in Vasai, repaying debt, purchase of plant and machinery, and working capital requirements. Further, it will also invest fresh issue money in the joint venture, Reserve Enviro, to grow pay-per-use/pay-as-you-treat business, and technology and other growth initiatives to access new markets.
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