IPO Size: Rs. 500 cr

• Rs. 175 cr Fresh Issue for (i) debt repayment Rs. 50 cr (ii) capex Rs. 39 cr (iii) working cap Rs. 20 cr (iv) other growth areas Rs. 33 cr
• Rs. 325 cr Offer for Sale (OFS) by investor AF Holdings (39% stake to drop to 14%, selling at ~16% IRR after 9 years) and promoter (61% to drop to 51% post IPO)

Price band: Rs. 665-701 per share

M cap: Rs. 1,451 cr, implying a large dilution of 34%

IPO Date: Thu 19^th Dec to Mon 23^rd Dec 2024, Listing Fri 27^th Dec 2024

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

Water Supply and Waste-water Treatment Company

Concord Enviro provides water and waste-water treatment and reuse solutions, including zero liquid discharge technology, to industrial customers in the pharma, chemicals, food and beverage sectors. Unlike EMS and Enviro Infra, it does not cater to higher-margin municipal business. 60% of Rs. 500 cr topline came from India and balance overseas.

5MFY25 Financials Dim

Of Rs. 497 cr revenue in FY24, 60% was derived from systems and plants, 20% O&M and 20% spares. FY24 EBITDA margin rose to 14%, from 12% YoY, leading to Rs. 41 cr PAT and an EPS of Rs. 23.

For five months ended 31^st Aug 2024, revenue stood at Rs. 206 cr, with share of higher-margin O&M and spares rising to 52%. Yet, EBITDA margin slipped to 7% with net profit of barely Rs. 50 lakh. In the absence of previous period financials, it is difficult to understand seasonality in the business / one-time impact and estimate full year profits. 

Capex, despite 40% Capacity Utilisation  

Company has operated at close to 40% utilization at its India and Sharjah plants.

It is undertaking Rs. 25 cr greenfield expansion in Sharjah (for membrane module) and Rs. 10 cr brownfield capex in India, likely to commence commercial operations in Jul 2026 and Sep 2026 respectively. Thus, revenue boost from additional capacity is a good 18 months away.  

Long Working Capital Cycle

The company has nearly 4 months of outstanding inventory and over 4 months of outstanding debtors. This is very long, impacting RoE, which stood at 12.9% for FY24, despite 8.3% net margin.

Order book for systems and plants segment stands at Rs. 502 cr, to be executed over the next 12 months

Promoter Remuneration

In FY24, two promoters drew remuneration of Rs. 12 lakh each. This is provided to rise to Rs. 2.4 cr each, which will impact operating profit by Rs. 4.6 cr or EPS by nearly Rs.1.8, going forward.

In-line Valuation

Estimating 12% profit growth for FY25E, EPS of around Rs. 25 discounts the IPO price by a PE multiple of 28x and an EV/EBITDA multiple of 16x, on current year basis. This appears fair, for the size of operations, FY25E RoE of 11% and micro-cap status for the stock, post listing.

Triveni Engineering is not a direct comparison, as it is a Sugar company, with Water vertical having an income of Rs. 244 cr in FY 24 with an EBIT of Rs.31.5 cr with Rs. 91 cr revenue in H1 FY25 and EBIT of Rs. 10 cr.

Bigger peer Ion Exchange, with Rs. 2,400 cr topline and 21% RoE is ruling at an EV/EBITDA multiple of 25x, for its consistent and superior financial track record. Similar EBITDA multiple for VA Tech Wabag with Rs. 3,000 cr topline and growing profitability.