The Rs 321-crore initial public offering (IPO) of EMS Ltd has fully subscribed within initial hours of first day of bidding on September 8. This may be attributed largely to the reasonable valuations, robust orderbook, government's focus on improving groundwater management through the Atal Bhujal Yojana program, robust cash flows and healthy financial performance.
The IPO of sewerage solution provider has received bids for 4 crore equity shares against the offer size of 1.07 crore shares, resulting into a 3.71 times subscription, as per the data available on exchanges.
High networth individuals and retail investors, so far, provided great support to the issue by bidding 5.97 times and 4.72 times the allotted quota which is 15 percent and 35 percent of the total offer size, respectively.
Qualified institutional buyers (QIB), who have 50 percent reservation in the issue, have also started putting in bids for the offer on day 1, subscribing 9 percent, while its anchor book, the 60 percent portion of the QIB component, was fully booked yesterday, September 7, a day before the issue opening.
Six investors - Abakkus Diversified Alpha Fund, BofA Securities Europe SA - ODI, Saint Capital Fund, NAV Capital VCC - NAV Capital Emerging Star Fund, Morgan Stanley Asia (Singapore) Pte and Meru Investment Fund PCC - CELL 1 - participated in the anchor book and bought Rs 96.37 crore worth shares at upper price band.
The price band for the offer, which closes on September 12, has been fixed at Rs 200-211 per share.
Also read: RR Kabel sets IPO price band at Rs 983-1,035 per share
EMS that provides water and wastewater collection, treatment, and disposal services intends to raise Rs 321.24 crore via public issue that comprises a fresh issue of shares worth Rs 146.24 crore and an offer-for-sale of Rs 175 crore by promoter Ramveer Singh.
The funds raised via fresh issue will be utilised for working capital requirements amounting to Rs 101.24 crore, and the remaining for general corporate purposes.
Cholamandalam Securities believes it is deep value buy IPO citing the attractive pricing, robust book to bill ratio of 3.2x, order book at around Rs 1,745 crore, likely revenue CAGR of 25 percent over next 3 years, operating margins likely to be sticky around 25 to 27 percent and foreseeable ROE of over 20 percent for next 3 years.
"Management’s undented focus on bidding and executing only high margin projects, augurs well," the brokerage said.
Incorporated in 2010, Ghaziabad-based EMS is the engineering, procurement, and construction (EPC) firm specialising in turnkey services for water and wastewater collection, treatment, and disposal.
It offers comprehensive solutions, including sewerage, water supply systems, water and waste treatment plants, and operation & maintenance of wastewater and water supply scheme projects for government bodies.
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As of July 2023, it is operating and maintaining 18 projects including WWSPs, WSSPs, STPs & HAM aggregating of Rs 1,744.92 crore & 5 O&M projects aggregating to Rs 99.28 crore.
At the upper price band company is valuing at P/E of 10.7x FY23 earnings with a market cap of Rs 1,171.7 crore post issue of equity shares and return on net worth of 22.31 percent.
Anand Rathi also believes that issue is reasonably priced and recommended subscribe rating to the IPO.
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