Strong debut | EMS lists at Rs 282, over 33% premium to IPO price

Sewerage solutions provider EMS Limited made a strong debut on the bourses on September 21, listing at a 33.67 percent premium to its issue price. The stock started trading on the NSE at Rs 282.05 and on the BSE at Rs 281.55, while its issue price was Rs 211.

The initial public offer received a strong investor response as it was subscribed 75.28 times, with investors buying 81.21 crore equity shares against the offer size of 1.07 crore shares. Qualified institutional buyers had bid 153.02 times the allotted quota, while the portion set aside for high-networth individuals was subscribed 82.32 times. Retail investors subscribed 29.79 times the allocated quota.

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As of July 31, 2023, the company was operating and maintaining 18 projects including Wastewater Scheme Projects (WWSPs), Water Supply Scheme Projects (WSSPs), Sewage Treatment Plants (STPs) and Hybrid Annuity Model (HAM) aggregating Rs 1,744.9 crore and 5 O&M projects aggregating Rs 99.3 crore.

"This distinctive project portfolio not only ensures a stable source of funding, fortifies the company's cash flow security and warrants zero bad debts and zero delinquencies," according to Chola Securities.

The company also has better return ratios than VA Tech Wabag, which also operates in the water treatment industry. EMS Ltd's return on equity and return on capital employed stands at 22.3 percent and 28.3 percent, respectively compared to VA Tech's 3.11 percent and 19.4 percent.

However, analysts have cautioned investors that vulnerability to shifts in government policies and competitive challenges from industry leaders such as L&T, particularly in the same segment, could threaten EMS' market position.

EMS posted a consolidated revenue of Rs 543.28 crore in FY23 and a net profit of Rs 108.67 crore. In the previous fiscal FY22, its revenue stood at Rs 363.10 crore and net profit at Rs 78.93 crore. Its PAT margins were 20.18 percent in FY23 and 21.97 percent in FY22, with RoE at 22.27 percent and 20.79 percent, respectively.