EMS Limited

about 14 days ago
EMS Limited

IPO Size: Rs. 321 cr

  • Fresh issue worth Rs. 146 cr, for funding working capital of Rs. 101 cr.
  • Offer For Sale (OFS) worth Rs. 175 cr, by promoter (97% stake to drop to 70%)

Price band: Rs. 200-211 per share

  • Rs. 34 cr pre-IPO placement at Rs. 211 per share on 18th Jul 2023 to private individuals

M cap: Rs. 1,172 cr, implying 27% dilution

IPO Date: Fri 8th Sep to Tue 12th Sep 2023, Listing Thu 21st Sep 2023

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.


Sewerage and Water Infrastructure Company

Ghaziabad headquartered EMS Limited constructs Sewerage Treatment Solutions, Water Supply Systems, Water and Waste Treatment Plants and other projects under Government Programmes such as Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and Namami Gange. It also undertakes operation and maintenance (O&M) of these projects, currently executing contracts in Uttar Pradesh, Rajasthan, Bihar, Uttarakhand and Madhya Pradesh.


Strong Order Book

As of July 2023, EMS’ order book stood at Rs. 1,845 cr, translating into a bill-to-book of 3.4x, based on FY23 revenue of Rs. 538 cr, which is very healthy. The sector holds a lot of promise given strong government focus through various welfare schemes such as Swachh Bharat Mission, Jal Jeevan Mission etc.


Sound Fundamentals

In past two years, both topline and bottomline have grown at mid-double digit CAGR. Based on FY23 EBITDA of Rs. 154 cr, EBITDA margin of 28% is attractive, leading to Rs. 108 cr net profit and a high net margin of 20%, which is quite rare for contracting companies. On equity of Rs.49 cr (FV Rs. 10 each), FY23 EPS stood at Rs. 23. While gross debt stands at Rs. 45 cr, as of 31.3.23, cash and equivalents of Rs. 121 cr translate into net cash surplus of Rs. 76 cr. Double digit net margin coupled with 22% RoE highlight strong financial position.


Single Digit PE

On FY24E EPS of about Rs. 29, shares are being offered at a PE multiple of only 7x, on current year earnings, which is very attractive, as most contracting companies are ruling in double-digit PE multiples. EMS’ high margins, cash rich balance sheet, healthy growth visibility and prudent working capital management (5 months outstanding in debtors + inventory despite 100% government contracts) are the key positives. Earlier this week, Vishnu Prakash, operating in a similar industry, saw a bumper listing.


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